What are Credit Cards?
Also known as plastic money, credit cards allow the owner to borrow money from the issuer (bank) to a certain limit every month at any given point of time. The borrower has the option to repay the borrowed amount in instalments or in lump sum before the due date.
What are the Eligibility Criteria for a Credit Card?
Usually, the eligibility criteria for credit cards differ from bank to bank. Some requirements like the minimum income level etc., can also differ for different cards offered by the same bank. However, some eligibility criteria remain the same for all banks and all cards. Given below are some such requirements-
- A person should be at least 18 years of age
- He should meet the minimum income criteria of the issuing bank.
- He should also be able to produce all necessary documents needed for identification.
How is a Credit Card different from a Debit Card?
The basic difference is that in case of a credit card the money you spend is borrowed money which you are required to repay to the bank before the due date while in case of debit card the money is your own money. The credit that you get on a credit card is short-term-zero-interest loan, if repaid before the due date. Your credit card also helps in building a credit history which is not possible in case of a debit card.
Features of Credit Card
Although different banks offer different features on their credit card, given below are a few characteristics that remain the same for all credit cards-
Payback in Instalments- The whole point of having a credit card is to be able to borrow money from the bank and pay it back in easy instalments. The customers can choose the EMI tenure as per their affordability. Some banks also offer 0% instalment plans under which no interest is charged.
E-Statement and Online Accessibility- One can register his credit card online to know about his spending and available balance along with a table of the ongoing EMIs. E-Statement is also sent to the registered e-mail ID of the customer.
Cash Withdrawal Facility- Most of the banks provide cash withdrawal facility on their credit cards. Banks might charge a certain amount but give you the freedom of cash withdrawal in any part of the world.
Insurance Coverage- Banks, usually, provide comprehensive protection for their credit cardholders. The coverage amount and other criteria might differ from bank to bank.
Joining Fee and Annual Fee- Unless it is a lifetime free credit card, users have to pay a certain amount towards the joining fee. Annual fee is also charged on the card which is deducted from the credit card balance once a year.
SMS Alerts- For every transaction made on their credit card, customers will get alerts on their registered mobile number. They will also be informed about the new offers and discounts available on their card.
Customer Service- Loss/theft of credit card can be reported by calling on the customer care number of your bank which is available 24×7.
Benefits of Credit Card
If you are prudent with your spending habits, credit cards offer a plethora of benefits which can be very rewarding for you. Let us talk about some such benefits-
No need to carry cash- With a credit card, the need to carry cash goes away. When you don’t have balance in your bank account, your ‘debit’ card is of no use. But a credit card helps you do shopping and entertainment hassle-free as you don’t have to worry about carrying cash. This also ensures safety of money. Online transactions can also be made with your credit card.
Fulfils emergency cash requirement- Whether there is a medical emergency or any other kind of unexpected cash requirements, credit cards can come for your rescue by providing credit under such circumstances.
Increases purchasing power- With credit cards you can spend more than you actually own. It raises your purchasing power. Now you don’t have to compromise on your shopping list due to shortage of cash.
Interest free credit- All credit cards offer you interest-free period where no interest will be charged if you repay the credit that you have taken within the due date.
Grace Period- Most of the banks provide grace period to their customers within which they can pay their outstanding EMIs without any extra interest charges. Generally, this grace period is 20 days starting from the day of the bill.
Reward points- Most of the credit cards offer reward points on the amount you spend through the credit card. You can use these reward points to get discounts on shopping, dining and some of the credit cards also give cash back on your fuel spends. You can later redeem your reward points to enjoy benefits. Some special credit cards offer extra reward points with special types of transactions like flight booking, dining, online shopping, etc. Usually, the banks offer 1 Reward Point for every Rs 100 spent on your credit card.
Build a credit history- One of the main benefits of owning a credit card is that you can build a credit history through this, if you don’t own any other type of loan. And you repay all your credit card dues in time you can build a good credit score which will help you in getting credit in future. Banks prefer giving loan to people who has a credit history. At times they may reject your loan application if you don’t have a credit history. Credit cards are one of the ways of building a credit track record.
Helps in tracking purchases- Shopping through credit cards helps in maintaining the track record of the transactions automatically. You can ask for Credit Card monthly statement to know where you spent the money in the previous months and plan your future expenses accordingly.