The Reserve Bank of India (RBI) reports a rise of 26.5% in credit card users in India. The growing numbers show the popularity of credit cards. Reducing cash transactions and keeping track of spending benefit credit card users.
A credit card is more beneficial than a debit card. You only need to swipe it to buy now and pay later. Moreover, these cards have worldwide acceptance. They also provide you with the financial freedom you desire. Continue reading to learn what a credit card is and how it can help you.
What is a credit card?
A credit card or plastic money is a small card the size of your driving license. It bears,
- The credit card number,
- The cardholder’s name,
- Expiry date,
- CVC code and other relevant details.
The bank that issues the credit card checks your creditworthiness for approval. The credit limit depends on your credit score and income. You can only spend up to the pre-approved limit.
On approval, the issuer bank links the credit card to your credit limit, not your bank account. Thus, the bank deducts withdrawal or payment accounts from the credit limit and not your bank account balance, as in the case of debit cards.
Who Can Apply for a Credit Card?
As per RBI guidelines, banks can issue credit cards via the credit card department. Indian banks can appoint a subsidiary company to issue credit cards. They may issue it to an Indian national or NRI, depending on their policy.
The bank approves the credit card of anyone:
- Who is 18 years of age or older
- Has a favourable credit score and negligible or zero payment defaults
- Has a stable income as per bank needs for approval of credit cards
- Is working at the same place for a year more. Top Benefits of Using Credit Cards
Fulfil the above requirements and apply for a credit card to avail of several benefits. They are as follows:
Easy to use
It is compact and easy to carry in your wallet. You can use it to buy groceries, pay insurance premiums, or pay housing loan EMIs. Such payments don’t burden or reduce your bank account as the issuing bank does not link the card to your bank account. These are interest-free withdrawals, provided you pay back within the grace period.
Rewards, discounts, and bonuses
Reward points have value and may differ depending on the bank with which you apply for a credit card. However, most banks provide the following rewards to credit card holders:
|Earn and exchange reward points for gifts.
|The bank rewards you with reward points for almost every transaction you make via credit card. The only condition is that the transactions should be for a specific amount. The bank offers a list of gifts, and you can redeem the gifts by using the reward points. Some banks even permit reward point redemption against the outstanding credit card balance.
|Rewards for Reaching Milestones
|The bank may set milestones for customers to reach with their credit card spending. If you achieve the milestone, the issuer bank will give you many bonus points. You can use them to redeem expensive gifts.
|Earn More Reward Points
|You can earn accelerated reward points using a co-branded credit card. Use the card to pay for travel (tickets and accommodations) or to buy groceries or other online commodities. For instance, a transaction that earns only one reward point may earn you three times more.
|Bonus Reward Points on Opting for a Credit Card
|Some banks and credit card issuing companies may offer many reward points for signing up. The condition may be to spend a specific amount via credit card in a fixed period to take advantage of the offer.
|Renewals Earn Reward Points
|A credit card is only valid for a limited time and has an expiration date. It is invalid after the expiration date, and you cannot use it without renewing. Most banks reward credit card users with reward points at each credit card renewal.
|Reward Points for Spending on Add-ons
|A credit card-issuing bank may issue an add-on credit card to the credit card holder’s spouse or children.
It is advisable to check your reward points as they come with an expiration date. Redeem them online, offline, or through customer care before they become invalid. You can redeem them for various products on the credit card issuers’ catalogue, donate them to your favourite charity, exchange them for e-vouchers of branded merchandise, or use the cashback facility. Some brands and online stores offer discounts if you use a specific credit card.
Build your credit score.
Applying for a credit card if you plan to opt for a housing loan or any other form of funding is advisable. Banks and NFBCs rate you as creditworthy depending on your credit card records. Here’s what you must do to build your credit score with the help of a credit card:
- Never exceed the pre-approved limit of the credit card.
- Never default on payments.
- Use only a minimal part of the approved credit.
Credit card EMI payments
Credit cards are of immense help when you need to buy an expensive product but don’t have the money to pay for it. It is an excellent option when you cannot repay within 3 months or in one lump sum.
Here’s how a credit card EMI can help in emergencies:
- Choose EMIs to pay small amounts in monthly instalments.
- Check if your product has a zero-interest EMI offer. Please note that even if you have to pay interest on the EMI amount, it is still worth it. It will be lower than the credit card’s outstanding balance interest rates.
- The tenure may vary from 3 to 18 months. Choose based on your ability to repay.
More Protection Via Credit Card
If someone tries to steal from you by using your credit card, you can alert the bank, and they will work to recover the funds. Thus, such fraudulent circumstances do not burden your bank account. It will not result in insufficient funds when you need them most. Moreover, it contains a detailed record of your transactions that works as proof of payment.
Credit cards are, therefore, the most convenient way to shop. If busy shopping malls do not appeal to you, shop from home with a credit card. Apart from deferred payments, they are good for saving money through their offers, discounts, and reward points.
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