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How To Use Credit Card in India

Credit card uses are many and varied. Depending on the kind of card you have, the advantages you enjoy can range from lifestyle benefits to discounts on travel and shopping. Check out the top uses of credit cards that you can benefit from below.

  • To make purchases on credit

The first use of a credit card is that you can purchase goods or services on credit with this product. All you need to do is swipe your card or enter the card details and make the purchase. 

  • To earn rewards and discounts

Credit cards give you reward points that you can redeem on specific benefits and purchases. Depending on the terms and conditions of the card, you may also earn discounts and cashbacks on specific payments. 

For instance, the Axis Bank IndianOil credit card available on Bajaj Markets gives you 100% cashback on fuel transactions. And the SBI IRCTC RuPay credit card, also available on Bajaj Markets, gives you 10% ValueBack as reward points when you book tickets on the IRCTC website.

  • To get insurance coverage

Another use of credit cards is that depending on the card you hold, you get to enjoy insurance coverage. The Axis Bank SELECT Credit Card gives you comprehensive insurance coverage that includes an air accident cover up to ₹ 2.5 crore, purchase protection up to ₹ 1 lakh, and a cumulative cover up to $500 for loss or delay of check-in baggage and loss of travel documents.

  • To track your expenses

You can also make use of your credit card to keep an eye on your expenses, especially if you make most of your payments via the card. The credit card statement you receive can help you track your spends.

How do Credit Cards Work Online?

Using a credit card online works in the same way as a debit card. While making an online purchase, you will be prompted to enter your credit card information, which typically includes:


  • 16-digit card number,

  • Expiration date, and

  • Security code (CVV).

This information is then sent to the issuing bank for verification. If the information is correct, the bank sends you OTP to confirm the payment. Once the authenticity of the transaction is confirmed, the payment is approved.

How do Credit Card Transactions Work in India?

Now that you know how to use a credit card in India effectively, let us look at how these transactions actually work in the background.


When you use a credit card to make a purchase, there are four primary parties involved in this process. They are –

  • Merchant/Shopkeeper,

  • Acquirer Bank,

  • Credit Card Network Provider, and

  • Issuing Bank.

Here’s a breakdown of how these parties collaborate to make a credit card transaction successful.

Step 1

When you swipe your credit card at the point of sale (POS) terminal or enter card details at the payment gateway, the reader fetches the transaction information.

Step 2

This information is then sent to the credit card network through the payment processor. Popular credit card networks in India are Visa, MasterCard, and American Express.

Step 3

The network then transfers this information to your issuing bank which verifies the credit limit in your account before processing the payment. If the limit is not sufficient or the transaction seems fraudulent, the issuing bank rejects it.

Step 4

Once the transaction is successful, you can take the delivery of the goods purchased. The merchant, on the other hand, adds your transaction to the batch of all credit card transactions that occurred during the day.

Step 5

These transactions are then sent by the merchant to the acquirer bank for payment processing.

Step 6

The acquirer bank then requests the issuing banks for the payment. At this stage, the issuing bank deducts a certain percentage towards interchange fees and pays the balance amount.

Step 7

In the final step, the acquirer bank deducts the merchant fees and pays the remaining balance to the merchant, thereby completing the whole cycle of the transaction.

What are the Common Terms Related to Credit Cards?

While understanding how to use credit cards in India, you may come across many technical terminologies. To make it easier for you, below is the glossary of some important terms related to credit cards and their meaning.


  • Credit Limit: It is the maximum amount of money that the issuing bank allows you to borrow. This limit is determined based on factors like your credit history, age group, income bracket, etc.

  • Billing Cycle: It is the time period between two consecutive credit card statements. During this time, the issuing bank calculates the amount due and charges thereon and generates your statement. An average billing cycle typically varies between 28-31 days.

  • Minimum Amount Due (MAD): It is the least amount that you must pay in order to avoid late payment fees and penalties. This amount is typically a small percentage of your total outstanding balance. It is important to pay at least the Minimum Amount Due to maintain your credit rating.

  • Interest-free Period: It refers to the time between the purchase date and the billing date during which interest is not charged on the unpaid balance. This typically ranges from 20-50 days, depending on the issuer of your credit card.

  • Credit Utilisation Ratio: It is a measure of how much of the credit limit you have used so far. A low percentage is generally considered to be a sign of good credit health, as it shows that you are not maxing out the credit limit. A ratio below 30% is considered ideal.

FAQ about How To Use Credit Card And Uses Of Credit Card In India

How much credit limit can I use?

You can technically use the entire credit limit on your card. However, to ensure that your credit score remains high, it is advisable to limit your credit utilisation to 30%.

Do credit cards offer a credit-free period?

Most credit cards offer a credit-free period known as the grace period, which can range from around 18 days to 55 days. During this period, you can repay your credit card dues without paying interest on the amount.

What are the uses of credit cards in India?

One of the most fundamental uses of a credit card in India is that it allows you to make purchases now and pay for them later. Other credit card uses include building credit history, improving credit score and benefiting from rewards points, cashbacks or miles.

How should beginners use credit cards?

Beginners using credit cards for the first time should remember to pay their bills on time and limit their credit usage to 30% of the available amount.

How many credit card payments can I make in a month?

There is no specific limit to the number of payments you can make in a month using your credit card. However, the total amount cannot exceed your credit limit, which is the maximum amount you can borrow from the credit card company.

How is credit card interest calculated?

The issuing bank typically charges interest on the unpaid balances on a monthly basis. Not paying off the balance every month can result in piling up of debt which affects your credit limit and eventually your credit rating.

Is it a good idea to use a credit card?

In general, it is a good idea to use a credit card if you can pay off your balances in full each month. However, whether or not to use a credit card depends on your financial situation and ability to use it responsibly.

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