First Credit Card

8 Things To Know Before Applying For Your First Credit Card

Having a credit card means you can easily make big purchases. When used rationally, a credit card benefits you in different ways. It is the best financial tool because it helps you develop a good credit history and improve your credit scores.

However, misuse of the card can affect your financial status. If you apply for your first credit card, you should learn its ins and outs.

Types of credit cards

Credit cards provided by banks and financial institutions are of two types- Secured and Unsecured. 

Many banks issue a secured credit card. For instance, the issuer may ask you to create a Fixed Deposit and issue a card with around 90% of the FD account balance. Suppose your FD balance is Rs. 5,00,000; your credit card limit will be Rs. 4,00,000.

As for the Kotak811 credit card against FD, you need to open a Fixed Deposit account with a minimum balance of Rs 5000.

On the other hand, you do not need to make any security deposit to apply for an unsecured credit card. However, issuers will focus on different factors before issuing the unsecured credit card.

Must Read: Different Types of Credit Cards in India

Important facts for first time credit card applicants

Here is a list of things you should know before applying for your first credit card:

1. The first credit card is important for developing credit

Having a good credit history is important when you apply for a loan. So, your credit card helps you show your creditworthiness and get your loan application approved. Ensure you have repair your credit card's dues at the right time. Financial institutions can determine your financial discipline based on your credit history and current scores.

You will receive a credit card report from your issuer every month. The report shows whether you have made your payments on time. You will also learn about the amount of credit you have used.

2. Low credit limit is safe for beginners

Many banks often set a low credit limit for first-time applicants to reduce the risk. Most applicants for first-time credit cards are young, and it takes time to become familiar with proper credit card management.

But there is also the option of increasing the limit in the future. The credit card company decides on the limit based on various factors. The issuer wants to see whether you are a part-time or full-time employee. A higher income means a higher credit limit.

3. Fees Related To the Credit Card

Before applying for a credit card, you should check its associated fees.

1. Joining fee- The issuer charges this one-time fee to provide various facilities. If you have chosen a high-end credit card, the joining charge will be slightly higher.

2. Annual charge- You need to pay the fee every year. But you can avoid this fee by choosing a lifetime free card.

3. Balance transfer charge- You can transfer one credit card balance to another card by making a certain payment.

4. Cash withdrawal charge- You need to pay a fee while withdrawing cash from your credit card.

Must Read: How to Build Credit Score With A Secured Credit Card

4. Try to make the minimum payment due in full

A credit card statement informs you about the minimum payment due. It is important to pay the smallest amount to maintain the good status of your account. But you should try to pay the amount in full. If you pay less today, you will need to pay more in the future.
The minimum amount covers the fees and interest of the past month. It is just a small percentage of the underlying balance.

5. Paying interest on dues is sometimes avoidable

Many think a higher interest rate is associated with a credit card. But the good news is that this interest is avoidable if you pay the full credit card bill every month.

A credit card comes with a grace period. There will be no accrued interest until the next due date. However, if you have not made the full payment, you need to pay interest on the balance in the subsequent month.

6. Learn about rewards for using the credit card

Various rewards are available with credit cards. You can redeem points for different rewards like discounts, cashback, hotel discounts, and many more. So, check the reward program before applying for the first credit card at Kotak811.

For instance, the Kotak Dream Different Credit Card lets you use redeemable reward points to buy flight tickets, movie tickets, etc. The value of 1 reward point is Re. 0.25.

7. Late payment penalty

Missing your payment due date makes your bill costlier. Every card issuer charges a certain amount for late fees. While some credit card issues charge penalty APRs, others do not. When you make a late payment, it leads to a penalty APR. The interest rate for new transactions may also become high.

If you have paid just a day late, it will not affect your credit significantly. However, if the payment is more than 30 days late, your credit report will show the late payment issue. To avoid this problem, you can set up automatic payments from a bank account.

8. Understand credit utilisation ratio

Credit Utilisation Ratio refers to the percentage of the available credit being used by the borrower. Credit reporting companies use the ratio to calculate your credit score.

A lower Credit Utilisation Ratio means a higher credit score. So, how will you manage this ratio?

  1. Pay the credit card balance on time.
  2. Request an increase in the credit limit
  3. Open a new credit account


Understanding the basics of a credit card is important before sending your application. It is also important to use the card strategically to avoid a low credit score in the future. Learn about the rewards available with the card and leverage their benefits. Choose between secured and unsecured credit cards, depending on your needs.