What is a Credit Card?
A credit card is a revolving amount sanctioned by the bank for you to use. It means you are given a pre-approved limit, and based on your behaviour of transactions and timely payments, over time your limit could be increased.
There are a range of credit cards available on the market that have various features and rewards connected to them. Most common are travel credit cards, shopping credit cards, entertainment credit cards, fuel credit cards, business credit cards, and some of them are lifetime credit cards.
Why do you need a Credit Card?
A Credit Card could be used to make online payments, you can use it instead of cash at merchant locations or when you do not have enough cash at your disposal and have a credit limit matching your requirement.
What are the interest rates for a Credit Card and what I do need to know about interest rates?
If you are an excellent customer, meaning you know what you can pay back in full the next month, you will never have to worry about paying interest on your credit card. However, if you make only minimum payments, then you will have to take note of the high interest rates banks charge on their credit cards, these rates are much higher than your personal loans, and so if you want to use a higher limit than you could pay in full the next month, it’s advisable to check for a loan option or top up an existing loan, in that way you pay less on interest. Since you were here, looking for the rates, let us tell you it could range between 15% and 42%, yes you read that right 42% per year. So think twice before you run up a huge amount on your card.
Apply for a credit card
Owing to the rising demand for credit cards on the market, banks and financial institutions have made the application process very simple for customers. You may apply for online and offline credit cards.
How to Apply online:
It is now very easy to use a credit card if you meet the eligibility requirements. You do not need to visit your bank branch for this purpose; instead, you can apply for an online credit card:
- You can visit the bank's website and apply for a credit card by filling in some basic information such as name, email ID, contact number, salary, address, etc.
- You will receive a call from a bank representative who will direct you through the process.
- A representative will also come to collect your documents at your entrance.
How to apply via Bank
People who are not comfortable with online application can visit the bank branch directly to apply for the same:
- Only visit the branch and inform about the type of credit card you need.
- The representative will tell you about the cards that match your needs.
- You will also have to fill out the verification form and submit certain KYC documents, such as proof of identity, proof of address, etc.
- You will also be asked to provide proof of income and two passport-sized photos.
Eligibility and Documents Required
The card compliance varies from provider to provider. The basic conditions are, however, as follows:
- You will be at least 18 years of age.
- If you are working or self-employed, you must have a daily source of income to pay your bills (the minimum income amount varies from one card to another).
- You do not have a negative history of credit.
Benefits of a credit card
Following are the credit card benefits:
Welcome Offers: Most banks offer various forms of welcome benefits to cardholders. Such benefits can come in the form of gift cards, discounts or bonus loyalty points and may be made available by activating a bank credit card within a defined period of time.
Fuel Surcharge Waiver: This advantage can now be used on nearly all credit cards. With fuel-centric tickets, additional benefits can be provided. When you refill your car or bike, the surcharge will be waived if you spend a certain amount.
Cash Advance: You can also withdraw cash directly from the ATM using your credit card. This is very helpful when you need some urgent cash in times of emergency.
Reward Points or Cashback: You will earn a few reward points or direct cash back credited to your account each time you make a purchase on your card. Accumulated reward points can be exchanged for free gifts and merchandise, while cash back bonuses are directly added to your card account.
Do all credit cards have an annual fee and a membership charge?
No, not all cards are subject to an annual charge and/or a membership fee. For the case of basic credit cards, there is typically no annual fee; however, cards with an annual fee also offer more benefits than zero annual fee cards.
Can I convert my transactions to EMI on my Credit Card?
Banks allow transactions to be converted to EMI’s based on your relationship and the amount in question. It’s solely up to them to process it or not. However, sometimes they may waive off the processing fee to convert the transaction.
Can I cancel my Credit Card?
You may opt to inform the bank on your decision to cancel the card, however keep in mind that any outstanding on the Credit Card will still be liable for a payment and all other obligations will continue as long as your total outstanding amount is paid in full.
May I use my credit card to get cash from the ATM?
This service is known as cash advances. You can withdraw part of your total amount of credit from the ATM as cash. But these cash withdrawals are subject to extra charges and have a higher interest rate than your card transactions.
Will my payment history affect my Credit Score?
Yes, a good payment record will increase your score, while your poor payment history will bring it down. Also the number of credit Cards you own with a total limit also affects your credit score, so it’s in your own interest to have a minimum number of cards you may need with the least amount of credit.
What's the difference between rewards and cashback?
Rewards can be collected in the form of points that can be redeemed at a later date against gift cards or credit statements, while cashback goes directly to your card account. Some cards provide incentives, and only a handful have cash-back facilities.
How do I read a credit card statement?
The key components of the credit card statement are the date of payment, the date of payment due, the total amount due and the minimum amount due. Those are generally stated at the beginning of the paragraph. The second section includes detailed details on transactions.
Credit Card Interest Rates comparison (Few Major Banks)
|S.No.||Bank||PL – Rate of Interest|
|1||HDFC||23.8% to 41.8%|
|2||ICICI||15% to 42%|
|3||AXIS||34.5% to 46.8%|
|4||Kotak||Up to 42%|
|5||SBI||Up to 40.2%|
|6||RBL||Up to 42%|
Disclaimer: The below figures are as on April 1st 2020, and are subject to change basis the bank’s discretion and/or policy at any time.