Credit cards have become an almost integral part of the urban financial life. They offer convenience, freedom from carrying cash around and also some rewards depending on the card variant one uses. There are numerous financial institutions that offer cards to people who may be interested in getting them as long as the applicant fulfills the stipulated conditions. Here it is important to mention that each of these financial institutions offer varied type of cards each with its unique features, reward structure, fee structure and so on. As we know credit card usage is an important aspect of the credit history and impacts credit score calculation; however does the type of a card one owns have any bearing on the credit score.
Does the type of credit card impact the Credit Score?
Manish has a credit card that is co-branded with a petrol company as he travels a lot within the city in his vehicle and this card type suits his needs. Arpita uses a card that offers benefits and facilities when travelling abroad as she needs to travel a lot overseas due to her work. Both pay their dues on time and keep their credit usage below 30% of the sanctioned limit.
Does usage of one card type have an advantage over card of another type when it comes to CIBIL Score calculation? No, it does not! The type of card one uses has no bearing whatsoever on the final score. The card variants are there for the benefit of the customer so that they can choose a card that suits their requirements and offers them the best services. So like in the above example for a person who gets a lot of refueling done at petrol pumps a different type of card is beneficial, a card that offers him cash backs on petrol filling and will not charge him for using the card at petrol pumps. Taking a card that is not internationally accepted or is accepted at a few select places, or where the user is charged a fee for every international transaction could prove to be problem for a user like Arpita.
Similarly there are cards that are suited for frequent shopping use, or travel ticket bookings and so on. Thus the customer will use a card based on how much his/her card usage per month, what does he/she use the card for, what is fee charged by the card company and what is their reward structure and so on.
Cards issued against fixed deposits are an exception! There might be instances when someone might be unable to get a credit card due to a poor credit score or no credit score at all; in such a scenario a credit card issued against a fixed deposit may come to the rescue of the applicant. These are cards that are issued against a deposit that is held at the bank as security. The card issuer has a security net to fall back upon in case of default by the card user. These cards can also help someone looking at building their credit score or improving it. Thus specifically credit cards issued against fixed deposits when used responsibly can impact the score in a way that other cards may not!
How Credit Cards Impact the Credit Score?
Irrespective of the type of card, usage pattern does impact the credit score. Using more than 30% of the sanctioned credit limit frequently can harm the credit rating even if the user does pay the dues on time. This implies credit hungry and risky behavior on part of the user, which is not a good sign for the credit rating. Not paying your card dues on time will also lower the credit card rating just like missing or delaying loan EMIs.
So for someone looking to keep their credit rating healthy, keeping the credit card usage less than 30% of the sanctioned limit, paying dues on time and maintaining old cards is a good idea. So don’t worry about the type of card you have, just use them wisely to stay credit healthy.
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