Credit cards are provided by various banks and financial institutions to users wherein they borrow money from them for meeting out their financial expenses. Credit cards offer great benefits in the form of cashback, rewards, interest-free period etc. The Indian society is slowly getting open to the use of credit card and thus there is a high demand for it which is being met by credit card companies coming up with various options to choose from.
The different types of credit cards available are travel credit cards, cash back credit cards, shopping credit card, lifetime free credit cards, fuel credit cards, co-branded credit cards, entertainment credit cards, premium credit cards and business credit cards.
Apply for a Credit Card
One can apply for the credit card either online or by directly visiting the bank or financial institution offering it.
Credit Card- Apply Online
Banks have some defined eligibility criteria for credit cards. If the applicant meets them, the whole process becomes easy and quick. One can apply for the credit card online by directly visiting the bank’s official website and filling in the requisite and asked details. The bank’s credit card representative will get in touch with you to guide you through the process and may also come at your home to collect the documents.
It is always advisable to compare different credit card providers before choosing the one. Fintechs like LoansJagat offers an excellent platform to the applicants wherein they can compare different providers for the rate of interest and offers and benefits provided by them and choose the one which best suits their requirements.
Credit Card- Apply Offline
Offline mode involves directly visiting the bank for applying for the credit card. The bank representative there will guide you through the process, will clear all your doubts and will give an insight into the benefits and offers which they can provide. Just fill in the credit card application form and submit the required documents.
How do Credit Cards work?
Credit cards can be thought of as loans which are provided by various banks and financial institutions wherein they provide a line of credit to the applicants so that they can spend more than what they possess. In return the customer has to return the amount in easy monthly instalments along with interest rate. The banks also charge an annual fee on the card. The credit cards are unsecured in nature and do not require any security or collateral to be kept to get them. The banks offer the credit card on account of the credibility of the individual.
Features of a Credit Card
The credit cards are defined by the following features-
- Alternative to Cash: They are a great alternative for making the payments when you are not having cash in hand. It is safe and secure way of shopping.
- Emergencies: Credit cards offer immediate financial aid in times of emergencies ex. medical wherein you need urgent cash to meet the need of the hour.
- Making Big Purchases: Credit cards are very well defined by ‘buy now pay later’ scheme thereby allowing you to make big purchases within the limit of your credit card and pay back the amount in easy monthly instalments.
- Build Your Credit Score: Credit cards are a great tool to enhance your credit score as it charts out the credit history through the credit card transactions. With regular payments of credit card bills, your credit score tends to increase. This increases your credibility and opens future avenues of availing credit in the form of loans.
- Secure Transactions: Credit cards are great way of carrying the money but in plastic form. With the chip and pin system installed in the credit cards, the cards are secure and save one from any Credit Card Fraud. While making online transactions via credit cards, a two tier authentication system ensures complete security.
- Track Your Purchases: With credit cards, it is easy to maintain the track record of the transactions and purchases.
Components of a Credit Card
Apart from the chip and pin system, the credit card also encompasses a lot of information in its front and back end. These include:
Front of a Credit Card
The front side of a credit card contains the following information.
- Credit Card Number
- Expiry Date
- Bank Logo
- Card Name
- Cardholder’s Name
- Network Logo
- Contactless Sign
Back Side of a Credit Card
Following information is available on the back of your card-
- Magnetic Stripe
- Signature Panel
- Bank Contact Information
- Terms and Conditions
Benefits of a Credit Card
Credit card offers the following benefits to its holders.
- Welcome Offers: Credit card providers offers several welcome offers to the customers in the form of gift vouchers, bonus reward points, discounts etc. These can be availed by activating the card within a defined time period.
- Reward Points or Cash Back: With each transaction through the credit card, the customer is awarded with some reward points or direct cash back credited directly into their account. The customer can redeem the collected reward points for availing free gifts and merchandises. Cash back rewards are applied to the card account directly.
- Fuel Surcharge Waiver- This facility can be availed when you spend a certain amount. The surcharge getting waived off saves you with some money.
- Airport Lounge Access- Few credit cards give a defined number of complimentary yearly lounge visits at domestic airports as well as international airports. Travel- credit cards and premium credit cards offer these perks.
- Insurance- Credit cards comes handy during the need of the hour as they offer insurance and cover accidents up to a certain amount.
- Cash Advance- Credit cards also offer the facility of cash advance wherein you can withdraw more cash than you actually have from the ATM. This comes handy during urgent cash requirements.
Credit Card - Fees and Charges
The benefits which come along with credit cards are not free of cost. Credit cards entails a lot of fees and charges. Joining fee and annual fee are two key fees which the credit card holders have to bear. Along with this, the customers also have to extra charges like Extended Credit Charges, Cash Advance fee, Overlimit Charges, Late Payment Fee, Duplicate statement fee, late payment charges, cash withdrawal charges, GST, ECS or Cheque Return Charge, foreign currency transactions, over limit fee etc.
How to Find the Right Credit Card?
Different banks and financial institutions offer different benefits and charges applied on the credit card. To choose the right one, it is advisable to compare different providers for their offerings in terms of interest rates, cashback, discounts, reward schemes, payments and card fees and charges. On account of what provider best suits your needs and requirements, the customer can choose the credit card.
Credit Card - Eligibility Criteria
Different credit providers have different eligibility criteria. But, the basic eligibility criteria include:
- The customer should be minimum of 21 years old.
- The customer must be backed by a regular source of income to pay the monthly instalments and bills of the credit card.
- The credit history of the customer must be good.
Documents Required for Credit Card Application
The customer needs to submit the documents mentoned below along with their credit card application. However, this also varies from one issuer to another.
- Identity and Signature Proof- One can submit any of these documents like identity proof- Passport, PAN card, Driving License, Voter ID card, Aadhaar card, employee identity card (in case of government employees).
- Address Proof- One can submit any of these documents as address proof-Bank statement, Rent Agreement, Voter ID card, Ration card, Passport, Driving License, telephone/ electricity/ water/ credit card bill or Property tax.
- Age Proof- One can submit any of these documents like age proof- a Voter ID card, Secondary School Certificate (class 10), birth certificate, Passport, Aadhaar Card, pension payment order or Receipt of LIC policy.
- Income proof for Salaried Individual: Salaried individuals can submit their latest 3 months' salary slips, Salary account bank statement for six months as income proof.
- Income proof for Self-employed businessmen/professionals: Latest IT Returns with computation of income and other certified financial documents along with with business continuity proof acts as income proofs for self-employed.
Credit Card Bill Payment
Credit cards come with monthly commitment wherein the customers have to pay the bill on or before the billing date which is mentioned on the document provided with the card. The outstanding amount on the credit card is shown as- Minimum amount due and total amount due. The customers got to pay the total amount due. However, if your pocket doesn’t allow, you can also opt for paying the minimum amount due thereby saving yourself of late payment fees. However, an extra rate of interest will be charged on the remaining balance. It is thus advisable to clear your outstanding dues on time to avoid getting your credit score hampered.