What is a Credit Card?
“Credit cards offer convenience, but they also come with the responsibility of managing your finances wisely.”Â
A Credit Card is a financial instrument that allows you to avail of credit on all your financial transactions. In simple terms, a Credit Card is a debt instrument that allows you to buy things now and pay for it later. All Credit Cards come with a specific credit limit, which is set by the issuer based on your credit score and your eligibility criteria.
Different Types of Credit Cards in India
- Standard Credit Cards: These are basic credit cards with standard features such as revolving credit, reward points, cashback, and discounts. They are suitable for everyday expenses and building credit history.
- Premium Credit Cards: Premium cards offer enhanced features and benefits compared to standard cards. They often come with higher credit limits, airport lounge access, concierge services, travel insurance, and exclusive privileges at hotels, restaurants, and retail outlets. Examples include Visa Signature, Mastercard World, and American Express Platinum.
- Travel Credit Cards: These cards are tailored for frequent travelers, offering travel rewards such as air miles, hotel stays, airport lounge access, travel insurance, and discounts on travel-related expenses like flight tickets and hotel bookings.
- Cashback Credit Cards: Cashback cards provide a percentage of the amount spent as cashback or statement credit. They are popular for everyday spending as cardholders can earn rewards on various categories like groceries, dining, fuel, and utilities.
- Fuel Credit Cards: Fuel cards offer discounts, cashback, or reward points on fuel purchases at designated petrol pumps. They often come with additional benefits such as waivers on fuel surcharge and discounts on vehicle maintenance.
- Shopping Credit Cards: These cards are designed for avid shoppers, offering rewards, discounts, or cashback on retail purchases. They may also provide special offers and EMI options for high-value purchases.
- Business Credit Cards: Business credit cards cater to the financial needs of small and medium enterprises (SMEs) and corporate clients. They offer expense management tools, business-related rewards, and higher credit limits to meet business expenses.
- Student Credit Cards: Student cards are tailored for college students and young adults who are new to credit. They often have lower credit limits and basic features to help students learn responsible credit usage and build a credit history.
- Secured Credit Cards: Secured cards require a security deposit and are ideal for individuals with limited or poor credit history. They help in rebuilding credit and often come with lower credit limits and fewer rewards compared to unsecured cards.
- Co-branded Credit Cards: Co-branded cards are issued in partnership with retailers, airlines, or other businesses. They offer rewards, discounts, and exclusive benefits when using the card for purchases with the partnering company.
- Lifestyle Credit Cards: Lifestyle cards cater to specific interests or hobbies such as golf, dining, entertainment, or wellness. They offer rewards and privileges tailored to these interests, enhancing the cardholder’s lifestyle experience.
Features & Benefits of Credit Cards
- Rewards: Get rewarded for using your card, like earning points or cashback every time you make a purchase. You can then redeem these rewards for things like gift cards, travel, or statement credits.
- No or Low Annual Fee: Pay less or nothing at all for owning the card each year, saving you money.
- Introductory Offers: Enjoy special deals like 0% interest for a period of time on purchases or balance transfers, helping you save on interest charges.
- Travel Benefits: Receive perks like airport lounge access, travel insurance, and waived foreign transaction fees when you travel, making your trips more comfortable and affordable.
- Purchase Protection: Protect your purchases against theft, damage, or loss, and enjoy extended warranty coverage on eligible items.
- Flexible Redemption Options: Have the freedom to choose how you want to use your rewards, whether it’s for travel, cashback, or other rewards.
- No Foreign Transaction Fees: Avoid extra charges when making purchases in foreign currencies or from international merchants.
- Digital Wallet Integration and Mobile App: Easily manage your card and make payments using your smartphone, with features like transaction alerts and spending analysis.
- Credit Limit: Credit limit refers to the maximum amount you can use through your credit card at a given point of time. You are liable to be charged a fee on exceeding the given credit limit. Credit Limits may change from month to month based on purchase and payment habits.
- Balance:Â The balance on your credit card represents the total amount you owe. This includes purchases, finance charges, and fees. You may check your balance online, or by calling customer service.
- APR:Â APR refers to the term Annual Percentage Rate, an interest rate applicable to the balance you carry forward past the grace period
- Grace Period:Â Grace Period refers to the period of time you are allowed to repay your balance in full before being charged a fee. Typically, balance transfers and cash advances do not have grace periods.
- Credit Card Fees:Â The most common fees include annual fees, finance charges, late fees, and over-the-limit fees. You may avoid certain fees based on how you use your card; for example by making credit card repayments on time.
Credit Card - Eligibility Criteria
| Credit Card Loan Eligibility Criteria | Constraints |
| Age | More than 18 years |
| Nationality | Indian |
| Credit Score | Above 650 |
| Income | Must have minimum income |
EMI Calculator for Credit Cards
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Calculate Your EMI
Calculate your monthly EMI and plan your futureÂ
The formula to calculate EMI for a Credit card is:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
- P represents the principal loan amount
- R represents the monthly interest rate, calculated by dividing the annual rate by 12 and converting it to a decimal.
- N denotes the loan tenure measured in months.
Documents required for Credit Cards
- Passport
- PAN Card
- Voter’s ID
- Aadhar Card
- Driving License
Tax Paid (Any one):
- IT returns (for 2 years)
- Form 16
- Â
Address Proof (Any one):
- Passport
- Utility Bill (telephone, electricity, water, gas) – less than 2 months old
- Aadhaar Card
- Driving License
- Ration Card
Income Proof :
- Salary slips (Last 3 months)
- Bank statements for the last 3 to 6 months (showing salary credit)
A credit card is a payment card issued by a financial institution that allows you to borrow funds to make purchases, with the understanding that you’ll repay the borrowed amount along with any applicable interest and fees.
When you use a credit card to make a purchase, the issuer pays the merchant on your behalf. You then repay the issuer either in full by the due date or over time, with interest, if you carry a balance.
Credit cards offer convenience, can help build credit history, often come with rewards programs, offer purchase protection, and can provide emergency funds when needed.
A debit card is linked to your bank account and deducts funds directly from your account when you make a purchase. A credit card, on the other hand, allows you to borrow funds up to a certain limit.
Consider your spending habits, credit score, rewards preferences, fees, and interest rates when choosing a credit card.
To avoid interest charges, pay your balance in full by the due date each month. If you carry a balance, interest will typically be charged on the remaining balance.
Use your credit card responsibly by making payments on time, keeping your balance low relative to your credit limit, and avoiding opening too many new credit accounts at once.
Contact your credit card issuer immediately to report the loss or theft. They will likely freeze your account and issue you a new card.
A credit limit is the maximum amount you can borrow on your credit card.
Calculate Your EMI
Calculate your monthly EMI and plan your futureÂ
The formula to calculate EMI for a Credit card is:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
- P represents the principal loan amount
- R represents the monthly interest rate, calculated by dividing the annual rate by 12 and converting it to a decimal.
- N denotes the loan tenure measured in months.