7 Factors To Consider Before Choosing A Premium Credit Card

October 29th, 2024 by Sambit in Finance

The term ‘Premium Credit Card’ generates many emotions. For some, it is the simplest way to enter the prestigious club of card users, while for others it’s a way to save more money. Premium credit cards have been all the rage, with more card users opting to move the convenience a few notches up with the premium tag.

Table of Contents

Premium Credit Card – What’s So Special?

A premium credit card is a limited-edition credit card that comes with a host of remarkable features and benefits. You may get an invitation from the card issuer to apply for a premium credit card if your credit score is decent or if you are a loyal customer with an active card.

With a premium credit card, you can get the following benefits:

Higher spending limit
More reward points
Better travel-related discounts, rewards, and cashback
Higher discounts on shopping and dining
Free movie tickets and many other benefits.

However, before lapping up a premium credit card, like the SBI credit card, you should know the factors that can determine your satisfaction with the card.

The Top-7 Factors to Consider Before Choosing a Premium Credit Card

1. Check the Credit Score and Credit Limit

Your credit score and credit utilisation ratio are the keys to getting a high-reward premium card. The better your credit score, the more benefits you can get from the card.

Before applying for a premium card, always check the credit limit the lender is willing to offer. Your new card should reduce the credit utilisation ratio, which directly impacts the credit score.

For example, if the existing credit limit on your card is INR 1 lakh and you spend INR 50,000 every month, then your credit utilisation ratio is 50%. If your new card increases the credit limit to INR 3 lakh, the credit utilisation ratio will drop to 20%. A drop in the credit score will improve your credit score and make you eligible to get more rewards and lower interest rates.

So, before getting a card, think from the credit score’s perspective and choose a card that can help you increase your credit score.

2. Choose a Card That Matches Your Lifestyle

A premium credit card comes loaded with tempting offers. But do you really need all these offers?

In a hurry, people often select a card that does not fit their style of spending. They eventually regret the decision later, because a premium credit card also comes with higher charges.

Hence, before applying for a premium card, evaluate your spending habits. Do you frequently buy items from online stores, or do you need the card to get travel discounts? Alternatively, you may select cards that give you the best dining options, in case you love to please gastronomy often.

By selecting a premium credit card that understands your spending style and rewards you accordingly, you can get more value from the card. Also, it will lead to less wastage of reward points, as you will anyways spend the points on things you like.

3. Be Cautious With the Terms

When you are planning for an upgrade to a premium card, the card issuer would be generously giving you welcome bonuses and high reward points.

But, before trusting someone blindly, you should read the fine print carefully and believe something only when you have tangible proof.

Sometimes, your card issuer may say that your all-new premium card will give you 1,000 reward point every month. But what they might not mention is that you have to spend INR 50,000 every month to claim the reward points.

Unless you read the terms carefully, you won’t find the hidden clauses that can make all the difference between happiness and sadness.

4. Analyse How Much You are Actually Saving

When you apply for a premium credit card, you have to pay an annual fee. The card issuer would almost always convince you that the charges you pay will be much lesser than the benefits you will get with the card.

But, as an informed card user, you must read between the lines and try doing the cost-benefit analysis to find out your real savings.

While it is true that a premium credit card comes with lots of benefits, you have to analyse which of the services do you really need.

For example, if you do not travel frequently, the extra miles might not make any sense. Similarly, if you do not own a motor vehicle, fuel points might be a waste.

Hence, the cost-benefit analysis is the best thing to do before getting a premium credit card.

5. Consider Your Needs

Before applying for a premium credit card, ask yourself the question – do you really need a premium card?

If you frequently miss the due date and your credit utilisation ratio is below 30%, then you should rethink your decision to get a premium card. If you are already struggling with your finances, then a premium card will put you in further trouble.

Most premium cards offer concierge services, which makes them so popular. Do you frequently use concierge service? If your answer is far from ‘yes’, you should probably reconsider your decision.

6. Think About the APR

The APR includes everything from daily periodic rate to the annual fee. The higher the APR, the more you have to shell out.

However, if you are a liberal spender, then the higher APR should not bother you much, as you would save more than the effective APR.

Sometimes, the card issuer would offer you a free card and would not charge interest during the first few months. But they may increase the charges when the free period expires. Ensure that you inquire about the long-term costs before accepting the card.

7. Be Content With One Card

Old habits die hard. But, it pays to shed off old habits when you have a premium credit card.

While a single standard credit card does not offer all facilities, you can usually get all facilities from a premium best rewards credit card in India.

However, by taking too many premium cards, you risk piling up debt.

Instead of applying for more than one premium credit card, you may apply for a prepaid card in case you need an extra card.

Conclusion

A premium credit card can not only enhance your convenience but also make you fall in love with a card all over again. Using the CRED app, you can get the same benefits that a premium card offers, even when you do not have a premium credit card.