What is a ‘Credit Card’
The arrival of credit cards has changed the way we look at the financial services world. Not only there is the convenience of not carrying cash whilst out for shopping or holiday or any other needs, there are a basket of other advantages that the credit card provides to its users. These include free credit period, points for every purchase that can be redeemed for gifts etc and goodies at the time of applying. No wonder, more and more individuals are using credit cards today.
A credit card is a plastic card (Dimension: 85.60 × 53.98 mm and thickness of 0.76 mm) and is issued by a financial institution which helps the card holder to have instant credit on need. The credit card can be used to (1) buy goods (2) buy services and (3) take emergency cash when needed. All this can be transacted online or off-line.
All the credit, so availed, comes at cost which essentially the pre-defined interest rate notified by the card issuing institution.
One new phenomenon now-a-days is to have co-branded credit cards which tries to leverage the brand equity of the financial institution and another customer focussed organisation. Such co-branded cards do offer additional benefits to the card holders.
Visa, MasterCard and American Express are three popular and recognized credit card variants in India.
Unlike debit cards, credit cards work on the principle of credit. For instance, individuals technically “borrow funds” when they swipe their credit card and are expected to repay the same when presented in their monthly bills. However, if misused, credit cards can create a nasty impact on the individual’s financial standing and push him to a debt trap.
A multitude of banks and financial institutions today provide credit cards to their customers. The number of credit cards that are provided also vary and each of them come with specific benefits and features to suit the needs and requirements of myriad customers. Customers can apply for credit cards through different ways as long as they meet the eligibility requirement set by the credit card provider. These days, customers can easily get a credit card online as well as offline.
|Types of Credit Cards|
|Regular credit cards||These are the basic category cards with lower entry threshold and lower limits and comparatively lesser benefits|
|Premier credit cards||Premier credit cards are cards from card issuers that come with flexible spending limits, lifestyle privileges, travel benefits, cashback offers, travel lounge accesses, concierge services, complimentary insurance cover and dedicated emergency assistance. Lot of these premium credit cards are issued only through invitation|
|Secured credit card||A secured credit card is generally issued against a fixed deposit held in the card holders saving account. This is held as a collateral by the card issuer and helps customer build a good credit history.|
|Prepaid credit card||A prepaid credit card works like a debit card, where the money is taken from an account associated with the card. Users can load cash on the prepaid credit card and can spend up to the available amount limit on the card.|
|Business credit card||Business credit cards are essentially issued on the instructions of business organisations to their staff to enable them to spend on specified categories on their behalf. Such cards generally have the name of the organisation embossed on the card.|
|Credit Cards – Benefits to look forward to|
|Welcome Gift||Many card issuers do offer a “welcome gift” to new credit card applicants once the card is issued to them. This gift can be in the form of bonus points, gift vouchers, discounts, etc. The welcome gift differs depending on the card and the bank.|
|Rewards Program||All credit cards have a reward program that allows cardholders to earn reward points on every transaction they make using their cards (except balance transfers and utility payments in some cases). The amount of points that cardholders can earn per transaction is fixed for specific categories of cards. The conversion is generally better for premium cards. The accumulated reward points can be redeemed for various gifts that are listed in the rewards catalogue of these cards. Most credit cards also allow card holders to convert their points against hotel stay points or air miles or both.|
|Fuel Surcharge Waiver||Many cards offer fuel surcharge waiver to credit cardholders when they spend specific amount of money on fuel every month. Taxes if any on this surcharge generally would have to be borne by the card holder.|
|Lifestyle Benefits||Cardholders who have premium cards do enjoy various lifestyle benefits like premium/fine dining, golf club memberships, wellness club membership, entertainment privileges and many more.|
|Travel Benefits||Some credit cards offer travel benefits to the customers including air miles, airport lounge access, travel insurance, airline offers, hotel offers, etc.|
|Airport Lounge Access||Some credit cards offer complimentary airport lounge (mostly international) access to the cardholders. This benefit is not unlimited and usually there is a cap on how many times card holder can access the lounge in a calendar year.|
|Add-on Cards||Almost all credit card issuers allow their cardholders to apply for add-on cards for their immediate family members (spouse and kids). Generally, add-on cards are issued for free and enjoy all the privileges of their primary cards but shall not carry additional spend limits.|
|Important info about credit cards|
|Name||Usually the name of the card holder or the add-on card holder.|
|Card Number||Usually a 16-digit number (in 4-4-4-4 format); in case of American Express it is a 15-digit number (4-6-5 format)|
|CVV (Card Verification Value)||The CVV Number on your credit card or debit card is a 3-digit number on Visa/MasterCard cards and is found at the back-side of the card; in case of American Express cards, it is a 4-digit number that is found on the front of the card.|
|Issue Date||Usually Month and Year in MM-YY format|
|Valid till Date||Usually Month and Year in MM-YY format|
|Minimum Due||Usually 5% of the balance outstanding to ensure that the credit card remains active.|
|Magnetic Strip||The most important part of your card is the magnetic strip on it. This strip stores the data pertaining to the card in it and facilitates transaction completion.|
How to use a credit card optimally
It is very easy to use a credit card. And as such it is very easy to goo overboard with it. If used properly, credit cards do offer a flexible way to cover unexpected expenses or manage your financial needs.
When banks issue a credit card, they create a revolving credit account (called limit) for the card. Card holder is expected to repay the outstanding amount at the end of every billing cycle, else he would be liable to pay interest charges, which usually is steep.
Tips for effective and efficient use of Credit Cards:
|Apply Credit Cards in India|
|Apply Online||Apply via specialists||Apply Offline|
|Individuals will have to visit the official website of the card issuer and fill in an online form to apply credit card of their choice. Do please check the eligibility criteria for the same. Card issuer might ask for documents in support of the financial status or address proof etc to be submitted off-line.||Another convenient online credit card application can be made through specialist websites such as .||This can be done by visiting the office of the card issuer. The applicant will be required to fill the necessary forms and in case they meet the required eligibility criteria, they will be able to apply for the said credit card.|
|All you have to do is to click on the link above and choose ‘Credit Cards’ from the top banner.||Alternatively, one can also approach the card issuers 24/7 helpdesk and request for a visit by their executive to help in applying for the cards.|
|They will then be taken to another page wherein they can see a comprehensive list of credit cards with comparatives.|
|Basis their requirements, they can click on the card(s) they wish to apply for and follow the interactive page and submit details|
|Document Required to Apply Credit Card|
|Proof of Identity||Proof of Address||Proof of Income (For Salaried)||Proof of Income (For Self-Employed)|
|Passport||Telephone Bill||Salary Certificate||Certified Financials|
|PAN Card||Electricity Bill||Recent Salary slip/s||Recent ITR (Income Tax Returns) Statement|
|Ration Card||Passport||Employment Letters||Audited Profit and Loss Statement or Balance Sheet|
|Aadhaar Card||Ration Card||Bank statements||Proof of business continuity|
|Voter’s ID Card||Rental Agreement|
|Driving License||Aadhaar Card|
|Tips to protect your Credit Card|
|Magnetic Strip||Do not expose it to magnets or strong magnetic fields which might impact the strip and stop the card from working.|
|Extreme Temperatures||Do not expose the card to extreme temperatures. Too much heat or cold is not good for the card.|
|No Bending||Always avoid storing your card in a location or manner that will result in bending or scratching the card. This would damage the card and render it useless.|