The opinions regarding the usage of credit cards are very diverse. On one end, people are looking into the pros of credit cards while on the other half, they are highlighting the cons of the cards. Ultimately, it comes down to how you use it and manage your personal finances. From a practical point of view, credit cards are one of the best financial companions. They help you get through various financial emergencies when you are short of funds.
Credit cards are issued by RBI-approved banks and NBFCs. Nowadays, there is an extensive range of credit cards on offer to satisfy your needs. You should choose the ones that fit your shopping style. For instance, if you are big on travelling, getting the Air India SBI Platinum Credit Card might be useful. Get an SBI credit card online anytime you want. Having a credit card can help you save more thorough discounts, offers, cashback and reward points.
What is a Credit Card?
A credit card is basically in the form of a plastic card but loaded with a pre-approved amount of credit that you can use to make purchases. Normally, you get a month to do a certain number of purchases but afterwards, a statement is issued regarding your expenses. You can repay the expenses within the grace period to avoid being charged any interest. You can either pay the full amount or the minimum amount due. In case of the latter, the rest of the balance would be carried forward to the next month and to be paid by the interest fixed by the credit card company.
Although the concept of credit cards is staple in countries with developed economies, nations like India – which is a developing economy – are also jumping on the bandwagon and using credit cards. You can buy jewelry to groceries with the help of credit cards. The inconvenience of carrying cash wherever you go is no longer valid. Cards are more convenient in terms of payments.
How do They Work?
Credit card companies provide individuals with the cards. They need to have a consistent income along with a good credit score. Sometimes, you can also get a secured credit card against your Fixed Deposit. Everyone has a designated amount they can spend in a month. Normally it is from 3 to 5 times your net monthly salary. However, that is not always the case and varies from bank to bank.
The payment gateway of these credit cards is facilitated by MasterCard, Visa and RuPay. They are not liable to fix any other conditions on the cards. Features like interest rates, discounts, cashback and reward points are done by credit card companies. It is to be noted that a credit card does not mean that you have more money. It just gives you extra time to pay back for your purchases. Therefore, every time you are paying with your credit card, you are borrowing money from your credit card issuer that you would be able to pay back during the grace period.
What are Some of the Things to Remember while Applying for a Credit Card?
Here are some facts that you should be aware of while applying for a credit card:
- Annual fee
- Length of the grace period
- Credit limit
- Cash withdrawal limit
- Values fixed on reward points
- Minimum amount due
- EMI options during bigger purchases
- Payment getaway system
What are the Various Types of Credit Cards?
Not all credit cards are created the same. They are made with a person’s spending habits in mind. For instance, a person who travels a lot would rather opt for a travel credit card rather than the one made for entertainment. Based on the habits, here is a broad division of credit card types on offer:
- Travel Credit Card: You can book flights, tickets and get cash internationally with the help of travel credit cards. Purchase them with your credit card and pay later. You can also get access to complimentary lounge support and reward points with them.
- Lifestyle Credit Card: Suitable for the elite population, these cards are the best for dining out or making higher purchases. The annual fee is also higher for these cards.
- Shopping Credit Card: This is the most common type of credit card, best suited for purchases such as clothes, pieces of jewelry and groceries.
- Fuel Credit Card: If you travel long distances using your private transportation, this card is for you. You can get discounts on fuel, apart from other benefits.
- Student Credit Card: Students pursuing higher studies can avail of this card. The eligibility criteria mostly depend on the guardian’s income. They can use it for purchasing, gadgets, books and stationery items.
Some other less used credit cards include:
- Business Credit Card
- Reward Points Credit Card
- Women Credit Card
- Cashback Credit Card
- Secured Credit Card
If you are confident about your financial responsibility, then getting a credit card has a lot of benefits. Determine your spending habits, along with your financial capability to decide on the type of credit card you want.