Be careful with fancy credit cards

Planning to get a new credit card? Well, if you thought you just had a silver, gold or platinum card to consider, think again.

The array of the credit card types available is quite bewildering. Besides these basic cards, there are a number of specialised ones which appear to offer more value or seem more attractive.

Additional Benefits

Most banks offering credit cards have the regular or basic silver, gold, platinum and titanium cards with varying features and spending limits.

But ‘special’ cards help when you spend far more in one category than another. Let’s say your shopping on groceries and utilities makes up the most in your monthly bill. Or you are a frequent traveller or book plenty of railway and bus tickets.

Special cards pick up certain lifestyles like these and plump up benefits there. For example, Axis Bank has a card designed for frequent movie-goers. In this card, you can receive a certain percentage of the amount you spend on (specified) movie theatres back as cash, besides extra reward points on dining and weekend spends.

So these cards do offer a little more in terms of benefits than regular cards of the similar category. Take HDFC Bank’s Teachers’ Platinum and its regular Platinum cards for instance.

Main benefits, such as no liability on lost cards, no surcharge on fuel spends and so on are the same in both. But the former gives out a bonus 500 points on Teacher’s Day and extra points on weekend purchases. Most benefits for the special cards are in the form of higher number of reward points, the quantum of which depends directly on your spending.

So, such cards are specifically designed to prod you into higher spending. Secondly, note that banks cap benefits such as cash-back. Citibank’s Cash Back card, for instance, gives 5 per cent as ‘cash back’ on a variety of spending such as movie tickets and utility payments. But this is amount is capped at Rs 100 per month per category. So if your utility bills total more than Rs 2,000, the amount you will receive is still only Rs 100.

Similarly, for categories carrying higher reward points, such as dining out, banks have a list of places which qualify.

So if you are wary of using your credit card too much, or use it only for high-value transactions, it hardly matters whether you take, say, a special shopping-oriented gold card or a regular gold card.

Besides, when considering special cards, you need to cross-check interest on outstanding bill amounts and cash advances, joining fees and annual fees on these with the regular ones as they can vary.

Continuing the HDFC Bank example above, interest charged on outstanding bills is 3.15 per cent per month for the teachers’ card, the same as the regular platinum credit card. But Axis Bank’s My Wings credit card and its Titanium Traveller card, both celebrating travel, have wide variations in annual fees.

> bhavana.acharya@thehindu.co.in

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