The simple answer to the question, “What is a credit card?”, is that it is a plastic or a metal card that grants access to credit. It allows you to make purchases, pay your bills, and even withdraw cash from the ATM. However, there is a limit on the amount you can use via your credit card.
The limit depends on numerous factors, like the credit card issuers and the type of cards you choose. Every time you swipe the card, the funds spent get deducted from the limit. As and when you pay the balance, your limit gets restored by that amount.
Knowing what is meant by a credit card helps if you want to apply for one. Read on to learn all about its uses, benefits, and more.
Along with understanding the meaning of a credit card, it is equally important to be aware of the components that make up a credit card. Here’s a quick look at these aspects.
The bank or financial institution issuing the credit card has its logo printed on the card, along with details about its payment network.
Your legal name, as registered with the bank, is printed on the credit card, along with a 16-digit card number. That said, American Express (Amex) issues credit cards with only 15 digits.
The magnetic strip on a credit card contains the credit card data. It is read by PoS machines when you swipe your card to pay for a purchase or make any other payment.
The EMV chip is a small chip on your credit card. Its primary function is to authenticate the card data and produce a unique code for each transaction carried out with the credit card. This makes it difficult for fraudsters to counterfeit your credit card.
The credit card issued to you is valid only for a set period. Both the month as well as the year of expiry are mentioned on your credit card. Upon expiration, the issuer will give a new credit card with a new number.
At the back of the credit card is a signature box where the cardholder is required to affix their legal signature.
The Card Verification Value (CVV) number is a three-digit number that can be found on a credit card. It acts as an added layer of security, especially during online transactions.
The purpose of a credit card is to facilitate cashless transactions. It allows you to buy a product or service and pay for it later, and these dues must be paid before the due date.
Yes. You can apply for a credit card online on Bajaj Markets. Alternatively, you can apply for credit cards by visiting the website of your preferred issuer.
The minimum credit score required to apply for a credit card tends to vary from one bank to another. However, applicants with a credit score of at least 700 and above have a greater chance of getting a credit card.
You can begin your credit card journey by checking your eligibility for the card you want. If you meet all the requirements, you can apply online or offline with the issuer. You can also choose online platforms like Bajaj Markets to enjoy easy hassle-free applications.
Your credit score is a three-digit numeric summary of your creditworthiness, which ranges from 300 to 900. It denotes your creditworthiness. The higher the number, the more creditworthy the individual is.
Credit history, on the other hand, is a record of the debts and other loan obligations that you repay. Financial institutions typically tend to favour individuals with an impeccable record of repayments.
Before you apply for a credit card, you should keep a few things in mind. For instance, you should first consider your lifestyle and spending patterns to know the type of credit card you require. Similarly, check to see if the rewards offered by the card fit these spending habits. Next, you should be aware of the maximum credit limit sanctioned with the card.
Assessing the fees and charges associated with the card gives you an idea of the cost you will have to bear. Reviewing the card’s interest-free period helps you better manage your finances and make timely payments.
Cashless transactions via credit cards eliminate the need to carry cash. However, you can also use your credit card to withdraw cash from an ATM when in need of immediate funds. Apart from payment convenience, credit cards bring you a plethora of rewards, discounts, offers, and cashback.
With these, the cards make each spend rewarding. Not just that, the deferred payment benefit of your credit card comes in handy during emergencies. You can meet emergency expenses with the card and repay the sum at a later date.
Lastly, diligently sticking to your payment due dates helps boost your credit score. A good credit score qualifies you for better loan offers at lower interest rates in the future.
You can apply for different types of credit cards depending on your needs and preferences. Rewards credit cards bring spend-based rewards on every expense, while lifestyle credit cards offer discounts on categories like dining, entertainment, etc.
Cashback credit cards convert a percentage of your spending into cashback rewards that can be adjusted against your statement. Travel credit cards offer reward points that can be redeemed for air miles, hotel booking, and flight tickets.
Fuel credit cards offer reward points on fuel purchases at select gas stations, helping you save on fuel costs. Other than these unsecured cards, you also have the option of secured credit cards. These cards are typically issued against FDs and have lower credit limits than unsecured cards.
Secured credit cards are a great option for individuals new to credit or those that have a bad credit score. These are the common variants, but you can find other types of credit cards in the market.
Credit cards issued in India usually come with a validity of 3-5 years.
You can buy almost anything with a credit card, including but not limited to electronic gadgets like smartphones, TVs, flight tickets and event tickets. You can also book hotel rooms and rent cars with a credit card.
However, buying a big-ticket item on your credit card makes more sense as you can repay the outstanding cost at a later date. Additionally, buying such items on credit card EMI helps ease your expense burden quite significantly.
Your legal heir will not be responsible for clearing the credit card liability in case of your demise. Since credit cards function much like unsecured loans, there is no collateral against them.
Hence, if the cardholder dies, the bank/NBFC has to write off the debt as well. However, if it is a joint credit card, the surviving co-holder will have to clear any outstanding debts.
A credit card is a plastic or metal card issued by financial institutions. When you use a credit card, you borrow from the issuer and repay at a later date. Failing to repay in full before the due date attracts a penalty in the form of interest.