One of the highly-used modes of payment, Credit Cards can be used for both offline and online purchases. One of the biggest advantages of owning a credit card is that it provides a lot of liquidity to the cardholder. You can make payments using your credit card even if you don’t have sufficient funds in your bank account at that moment. The credit is interest-free if you pay the money back within a stipulated period of time. Presently, most of the banks offer credit cards along with exciting offers like cashback, lounge access, etc.
What is a Credit Card?
Credit cards have grown highly popular in recent years, thanks to the development in internet trade using plastic money. They are an excellent financial instrument and a superior alternative to cash for online purchases. You may even apply for a credit card over the internet. One of the many advantages of having a quick credit card is that you are required to pay your monthly expenses on a later date each month. It comes in the form of a plastic card that may be swiped on point-of-sale terminals or used to make digital payments at merchant establishments (such as a shopkeeper).
The advantages of using a credit card are numerous and different. With good reason, personal financial professionals spend a lot of time attempting to keep us from using credit cards. Many of us make irresponsible credit card purchases and wind ourselves in debt. However, contrary to common assumption, you’re far better off paying with a credit card than a debit card and keeping cash purchases to a minimal if you can utilise the cards properly.
Also Read: Credit Card Tips, Tricks, and Hacks in India
Credit Card Details
A credit card is one of the most important financial developments of present era, allowing internet transactions to be made more easily. It permits a cardholder to buy goods and services on credit and pay them off at a later time. Furthermore, the advantages of using a credit card over other forms of payment make it a far superior choice, and it eliminates the need to have cash with you at all times. The following are some of the most important credit card advantages.
- To enhance your credit score: Using a credit card responsibly might help you increase your credit score. The reason for this is that organisations that provide fast credit cards will record your payment activity to the credit agencies. Furthermore, one of the most important credit card facts is that if you pay in full within the grace period, you will not be charged interest on your transaction. As a result, paying your monthly payments in whole and on time can help you improve and develop your credit score faster.
- To get an immediate loan: Keep in mind that if you have a decent credit score, you can get a loan against your credit card. You may also convert your purchases into Credit Card EMIs, which may be paid over the course of a pre-determined loan term. When compared to other types of loans, pre-approved credit card loans offer the quickest turnaround time. You will not require any more paperwork, however, a personal loan will necessitate some amount of paperwork. Loans secured by these cards often have interest rates that start at 11.50 percent per year and can last up to five years.
- To earn rewards points and cashback: You may also take advantage of the lucrative reward points and cashback offered by credit cards. These rebates and discounts help you save money on your purchases. Reward points, on the other hand, maybe redeemed for products or services from partner stores. As a result, using these cards for more online transactions can help you earn more of these perks.
- To save money on groceries store: Grocery shopping is a frequent job for many individuals, thus there is no other choice that comes to mind other than utilising these cards. The majority of the cards are linked to supermarkets, which means you may earn extra cashback or discounts on your usual purchases. The more money you spend, the more money you save with these cards.
- To reduce the cost of current debts: The major benefit of employing them is that it allows you to break free from the debt cycle, which only becomes worse over time due to compounding interest rates. If you owe money on an old credit card, you can save money by moving the outstanding balance to a new credit card with a reduced interest rate.
- To plan an international vacation: If you are planning an international vacation, the finest travel credit card will provide you with a number of advantages. International credit cards nowadays have a minimal or no foreign currency transaction fee. Additionally, some cards provide worldwide customer service, which is beneficial during your much-anticipated vacation. Furthermore, many travel-related cards provide special savings on flight tickets, vehicle rentals, hotel reservations, and other services.
- To earn free flight and accommodation: Apply for a credit card that gives hotel rewards and privileges online. The points may be used to get a free flight or a free hotel stay. For an exotic vacation or weekend trip, you may make the most of complimentary services.
- Saves time: Having a credit card eliminates the need to carry cash around with you. It also saves you the effort of looking for ATMs, as well as the time it takes to visit them.
- To keep track of your expenses: Credit cards make it easier to keep track of your daily expenditures. The name of the merchant, the time of the transaction, and the amount of money spent are all included in your statements. Some cards also provide a 12-month summary that might be useful for filing taxes.
Benefits of a Credit Card
The usage of a credit card is basic and straightforward. Here are a few of its advantages:
1. Regular Payments: You may set up future billing for your power bills, phone bills, and other expenses with a credit card.
2. Free Credit: Each credit card comes with a 40-50 day grace period. If you make a purchase and pay it off entirely during the grace period, you will not be charged interest. If, however, interest is levied on your bill, the grace period is no longer valid.
3. Credit Score: Many individuals are unaware that using a credit card is one of the most effective strategies to raise your credit score or establish a credit history.
4. Accessibility: Carrying currency around is no longer possible, nor is it totally secure. You may, however, easily take a little plastic card with you wherever you go and complete the purchase with a simple swipe of the card.
5. Refunds and Discounts: Credit cards provide a variety of incentives, including cashback and discounts on in-store purchases, gas, internet purchases, eating, and travel.
6. Rewards: When you use a credit card, you get reward points that vary depending on the card and the bank. You may use these points to receive gifts and coupons by redeeming them.
Credit Card and their different types
Hundreds, if not thousands, of credit cards, are available today, spanning numerous categories and offering a variety of perks. Some of the most popular credit cards are listed below:
1. Credit Cards with Balance Transfer: Credit cards with balance transfer enables you to transfer the balance of one credit card to another.
2. Rewards Card: The rewards cards are tailored to the needs of customers. When you make a purchase using your rewards card, you receive points. Some cards, for example, would award 4 or 6 reward points for every Rs. 200 spent. The benefits differ from one bank to the next.
3. Business Credit Cards: These cards are meant for corporations, partnerships, and small and large organisations. The card is mostly owned by the company, but it can also be provided to employees with a credit limit set by the company.
4. Cashback Card: Everyone likes to make money as they spend it, which is why cashback is so popular. Each issuer’s cashback amount will be different.
5. Co-branded Cards: Many issuers work with brands to provide credit cards with exclusive discounts and offers for that brand. Yatra SBI card and HDFC Snapdeal credit card are two instances of co-branded credit cards.
6. Women’s credit cards: Some credit cards are intended exclusively for women. It offers cashback, incentives, and interesting incentives to women on a variety of transactions, including shopping, surcharge waivers, and dining, among others.
7. Secured Credit Cards: A secured credit card is one that requires you to put down a set amount of money as a deposit. You must submit a sum that is equal to or slightly greater than the allotted credit limit. This card is ideal for folks who are new to credit or want to enhance their credit score.
8. Prepaid Credit Card: As the name implies, this card comes pre-loaded with money. This form of credit card is typically used as a forex credit card. These cards function similarly to debit cards in that the amount you spend is deducted from the funds you already placed.
9. Premium Credit Cards: As the name implies, this is a credit card designed specifically for high-end clients. It provides high-end services and benefits such as club memberships, dining privileges, and so on. As an eligibility criterion, these cards have high minimum spending limitations and a high-income requirement.
10. Credit Cards for College Students: These credit cards are developed exclusively for college students. The student must be at least 18 years old and provide proof of work as well as a tax return.
How to Apply for a Credit Card Online?
All you need is a good internet connection to apply for a credit card online with quick approval. Banks nowadays provide prompt service and approve credit cards within a day or two.
The following are the steps to apply for a credit card online:
- Go to your bank’s website and select the ‘apply online’ option for credit cards.
- Fill out the application form, which includes your name, date of birth, address, phone number, PAN card number, and other personal information.
- Following that, you will be contacted by a bank credit card representative who will walk you through the full application process.
- Once your application has been accepted, a bank employee will visit your home to collect the necessary paperwork.
You have the option of choosing your credit card offline in addition to applying for one online. You may apply for a credit card at the bank directly. You will also be asked to give the bank vital credit card documentation such as identity evidence, a pan card, and proof of address. It will take no more than 7-10 days to get the card delivered to the specified address after the documentation is completed.
Credit Card Eligibility
Credit Card Eligibility varies depending on the bank’s internal credit criteria and the card’s intended use. The following are some of the basic qualifying criteria:
|Age||Minimum age is 18 years old.|
|Income||Must be employed, self-employed, or a company owner.|
|Employer||It must be a private or public limited company/government/recognised entity.|
|Savings Account||They are required to have a savings account in their name.|
|Credit Score||Having a good Cibil or credit score is important.|
|Existing relationship||Whether or whether the applicant has had any previous dealings with the bank|
|Annual and renewal fees||Some high-income category members may be eligible for a waiver on yearly and renewal fees.|
|Payment history||If credit card usage is disciplined and constant, the bank may increase the credit limit.|
Interest rates and charges of Credit Card
Late monthly dues payments, as well as payments less than the minimum monthly due amount, result in charges or a large penalty on your credit card. The appropriate credit card interest rate is applied to the whole outstanding balance on your credit card payment.
Any additional spending on the card, in addition to the current debt, will be subject to interest until the full balance is paid off. Always compare credit card advantages and interest rates from several banks to get the best deal with the lowest interest rate.
Credit card interest rates are calculated on an annual as well as a monthly basis. The Annual percentage rate (APR) refers to the yearly rate. Unlike an interest rate, which simply refers to the interest imposed on a debt, an APR is the sum of the interest rate plus any additional charges or expenses associated with obtaining the loan. This includes any transaction-related extra fees. An online credit card’s annual percentage rate (APR) might range from 36 to 50 percent. Defaulting on or postponing your bill payments might result in a late penalty on your accrued debt, resulting in your credit score being ruined.
Payment via Credit Card
The billing cycle for credit cards is monthly, which is defined as the time between billings. Any purchases made with the card throughout the payment cycle are included on your monthly statement. Then, at the conclusion of the billing cycle, you’ll be charged for the purchases you made during that time period. The sum that was left unpaid at the conclusion of the previous billing cycle will be carried forward into the following billing period. After the billing cycle, there is a grace period. Assume your billing cycle runs from January 6th to February 5th, with a due date of February 21st. This period, which runs from the 5th to the 21st of February, is the standard grace period for credit cards. Any purchases made during this time will be billed in the following billing cycle. Credit card payments must be paid on promptly, that is, before the grace period expires, or interest will be charged on the balance. By entering into your net banking account, you may make an online credit card payment.
How to go and get the best Credit Card?
With so many credit card offers from so many different banks, choosing the appropriate credit card can be challenging. Here are some guidelines for selecting the finest credit cards:
1. Check your credit score: You should always check your credit score before applying for the finest credit cards. If your credit score is low, you may face rejection of your credit card application, or even if you are approved for a card, it may come with a lesser credit limit and high-interest rates. As a result, it is critical to keep track of and maintain your CIBIL score on a regular basis.
2. Compare the interest rate or annual percentage rate (APR) of several credit cards: If you do not pay your outstanding payment by the due date, the annual percentage rate (APR) or interest rate is the cost of borrowing on the card. You may compare the APRs of many credit cards and select the one with the lowest interest rate.
3. Examine your spending patterns with care: The majority of credit cards target a certain client group by providing cashback and bonuses on a certain type of transaction. For example, whereas fuel cards offer higher rewards on gasoline purchases, travel cards offer flight miles, access to airport lounges, and hotel stays. Similarly, some credit cards give up to 5% cashback on utility purchases. As a result, one must carefully examine his or her expenditure and then choose a card that provides the most benefits.
4. Choose a greater credit limit: A credit card’s credit limit refers to the maximum amount that may be withdrawn without penalty. If you go above this limit, you’ll be charged an over-limit fee on the amount you went over. Based on a review of credit score and payback history, a credit card issuer can increase or lower the credit limit of current cardholders. A consumer with a greater credit limit has more flexibility in meeting emergency needs.
5. Compare welcome bonuses and rewards: Many credit cards provide appealing welcome bonuses and advantages in the form of bonus reward points and vouchers. Check the expiration date of your reward points as well. While some issuers give reward points for two to three years, others give reward points that never expire. As a result, while evaluating the best credit card options, consider the monetary worth of joining incentives as well as the expiration date.
6. Yearly fees and penalties: Credit card issuers profit by imposing annual fees on the card. Joining cost, yearly cost, late payment cost, cash advance cost, and rewards redemption cost are some of the main expenses. As a result, always choose a card with several perks such as cashback, welcome vouchers, discounts, or reward points that surpass the annual charge and joining charge. There are additional penalties for not paying your payment on time or exceeding your credit limit. As a result, choose a card with a fair charge.
Which one is better: Debit Card or Credit Card?
Plastic money, often known as credit and debit cards, has unquestionably become the most popular alternative to cash in the modern world. Most individuals currently carry at least one of these cards and use them for activities such as bill payments, supermarket shopping, travel reservations, and so on, whether they are businessmen or salaried employees. While these cards have a similar appearance, they have different functions.
1. What is a credit card with an add-on feature?
An add-on credit card is a credit card that is issued in addition to the primary card. Family members, parents, spouses, and children aged 18 and up can all receive this card. Each credit card can only be issued a certain number of supplementary cards, each with the same credit limit. The principal credit cardholder is liable for paying the total amount owed to the primary and supplemental credit cardholders. If payments are not paid by the due date, the primary cardholder is responsible for paying the interest.
2. Is it possible to acquire a credit card with a poor credit score?
Yes, even if you have a poor credit score, you can acquire a credit card. You will, however, be eligible for a basic credit card, which has the fewest offers and a low credit limit, or a secured credit card, if you have a poor credit score.
3. What is the best way for me to acquire my first credit card?
When you have at least 6 months of work experience in the same business and a monthly income of more than $15,000, you may apply for your first credit card. Almost every bank issues a basic credit card, which serves as an entrance point for people who are new to credit.
4. How long does it take for a bill to be paid?
The billing cycle is the time period in which your bill amount is computed between billings. Depending on your credit card, the billing cycle might range from 25 to 40 days, but it can also be shorter or longer. Assume your credit card bill is generated on the seventh of each month. Every month, you will get a bill that includes all of your previous month’s spending. Any purchase made on the eighth day of the month will be applied to the following billing cycle.
5. What Is the Interest Rate on a Credit Card?
The interest rate on a credit card is the fee or cost you pay for borrowing money with your credit card.
6. When does the grace period begin?
The grace period is the time between the end of the billing cycle and the due date of your bill. During this time, you must pay off all of your debts without paying any interest or late fees.
7. What is the distinction between a debit and a credit card?
Your savings account is used to fund the debit card. It enables you to make use of money that has already been placed into your account. A credit card, on the other hand, provides you with immediate credit by paying for the items you wish to buy.
8. How long does it take to get a credit card authorised online?
Your credit card application will be accepted in around 1-2 business days on average. You may receive quick acceptance on your credit card application by filling out the form on an online marketplace.
9. What are the most prevalent credit card types?
Cashback cards, online shopping cards, vacation cards, lifestyle cards, and premium cards are some of the most prevalent credit card kinds.
10. Is there a way for me to avoid paying interest on my credit card?
If you don’t want to pay interest on your credit card, make sure you pay it off each month. Every credit card includes a grace period during which no interest is charged, and if you pay off your credit card each time during this period, you will not be charged interest on your transactions. However, if interest is charged once, it will be applied to your future purchases instantly.
11. What happens if I pay off my credit card amount too quickly?
Your credit card balance turns negative when you overpay your credit card issuer. It’s hardly the worst scenario in the world. You should, nevertheless, make every effort to prevent it. This is because your money will be locked up with a credit card provider since you won’t be able to withdraw it, and it will collect interest for them rather than you.
12. What additional terms and conditions should you be aware of when applying for a credit card?
Before signing a loan agreement, we always urge our customers to read the fine print. The following are some examples of suggestive words to look for:
- Annual costs in the first year and upon renewal, especially if you chose a card with a reduced or no annual charge.
- Obtain a formal guarantee that in the event of no annual fees credit cards, you will not be charged.
- If you do not pay the minimum amount due by the due date, you may be charged a late fee. If you do not pay off your credit card bills, you will be charged interest on the outstanding balance.
- If you need to use an ATM, you’ll be charged a cash advance fee.
- Charges for exceeding the credit limit set out by the lender.
- Prescription requirements, insurance coverage requirements, and so on.
- Other hidden late payment fees include the loss of reward points and other advantages.
13. What factors does the card issuer consider when determining your credit limit?
The credit and cash withdrawal limitations of the cardholder are determined by the potential card issuer. At the time of card distribution, these restrictions are notified to the consumer. The credit score, income, prior track record, firm category you work with, and your current relationship with the bank are all important variables that may affect the card issuer’s choice.
- Statement of Accounts
- Identity verification (passport, PAN card, Aadhaar card)
- Proof of age (PAN Card, 10th and 12th-grade mark sheets)
- Proof of address (electricity bill, Aadhaar card, driver’s license, voter id)
- Income Statement (salary slips for the last three months)
- IT returns from the previous year (only for self-employed people)