About Credit Cards

Credit cards are financial tools that allow holders to make purchases and avail of services up to a predetermined limit. They enable you to make all kinds of online and offline transactions without having funds debited from your bank account.

A credit limit is the maximum amount you can borrow on your credit card. The card issuer determines it based on your credit history, income, credit score, and other financial metrics.

The card issuer provides a monthly statement detailing your purchases. You can repay your bill in full or pay a minimum amount. Repaying in full lets you avoid paying interest on your credit card expenses.

Credit cards come with a range of perks such as rewards, cashback, or points that can be redeemed for various benefits, adding value to your card usage.

How do Credit Cards Work?

When you make a purchase with your credit card, the card issuer pays the merchant on your behalf. You must repay your outstanding balance at the end of each billing cycle. If you choose to pay the minimum balance instead, interest will be charged on the remaining amount.

It is crucial to use your credit card responsibly and make timely payments. This avoids debt accumulation and enables a healthy credit score. Using a credit card responsibly can be a more effective means of paying than using cash or debit cards.

What are the Benefits of Credit Cards?

·  Convenience: A credit card is a convenient and widely accepted payment tool. They eliminate the need to carry cash.

·  Improve Credit History: Through responsible usage and timely payments, you can establish a positive credit history, which helps future borrowing.

·  Flexible Purchases: You can make purchases even if you do not have immediate funds. This is like a short-term loan that can be repaid at ease.

·  Rewards: Credit cards offer rewards in the form of cashbacks, points, airline miles, lifestyle spending offers (dining, shopping, entertainment, etc.), fuel surcharge waivers, and more.

·  Purchase Protection: Some credit cards offer reimbursement for damaged or stolen items procured with your credit card.

·  EMI Conversion: Credit cards allow you to make big purchases, convert them to EMIs, and spread the expense over several months. This benefits users who can pay smaller amounts monthly instead of a lump sum amount.

Types of Credit Cards

1.    Standard Credit Cards

These are basic credit cards with standard features and benefits. They usually have a moderate credit limit and may offer some rewards or cashback benefits.

2.    Premium Credit Cards

Premium cards have higher credit limits and exclusive perks like airport lounge access, concierge services, travel insurance, and premium rewards programs. They often have higher annual fees.

3.    Co-branded Credit Cards

These cards are issued in partnership with a specific brand, such as airlines, hotels, or retail stores. They offer rewards, discounts, or special privileges with the partnering brand.

4.    Secured Credit Cards

These cards are backed by a security deposit, making them accessible to individuals with limited or poor credit history. They work similarly to standard credit cards but require a deposit as collateral.

5.    Business Credit Cards

These cards are designed for business expenses. They offer expense tracking, employee cards, and business-specific rewards.