Credit cards: Eligibility, different types of cards, rewards, charges - All your questions answered

While managing your finances could be tricky, the knowledge needed for it must come easy. If you've ever had your thoughts lead to a series of questions, this is everything you need to know. Find all your questions regarding credit cards answered below.

Credit cards 101 Everything you need to know

Going over the basics is always helpful. Even a simple question like 'what is a credit card?' could help improve your existing knowledge. On the other hand, not all of us would have a detailed understanding of things like 'How does the new EMV chip and PIN system for credit cards work?

In this article, you will find yourself go from beginner knowledge in credit cards to the advanced level in no time. 

What is a credit card?

A credit card is a financial tool that allows you to borrow or take credit from a bank for purchases. A credit limit is assigned to you basis your employment details, credit score, and other financial and regulatory (KYC) details. This credit facility can be used to purchase goods and services across any offline or online card accepting service. A credit card is convenient to use, especially when you don’t have cash at your immediate disposal. It enables the cardholder to take credit to make purchases on a short-term basis. The money has to be paid back within the specified term or interest-free period. Failing to do so will invite interest or penalty charged by the bank. 

How does a credit card differ from a debit card?

A debit card user withdraws money directly from his or her checking account. A credit card user, on the other hand, utilises credit from the pre-approved limit offered by the bank for which they will be billed later. In the case of a debit card, money is debited directly from your bank account. A credit card user, on the other hand, is given a short-term loan through the card issuing entity. The credit card user receives a consolidated purchases credit card bill at the end of the billing cycle basis the amount they have utilised. If they do not pay the entire amount by the due date or decide to break up the bill into EMIs, the actual amount due will increase on account of the additional charges.

To know more about debit cards versus credit cards, go here

What is the difference between Visa and Mastercard?

For the consumer, there is no real difference between Visa and Mastercard. They are both modes of payment or payment technology companies. Different banks issue credit cards utilising either of these modes of payments. However, these service providers are not the ones to decide the interest charges or reward program. That is decided by your card issuing company. 

Before making a merchant payment, it should be noted that a Mastercard won't work on Visa's network and vice versa.

Related: How Does RuPay Card Differ From Visa Or Mastercard?

What are the different types of credit cards?

  • Standard credit cards: These no-frills credit cards offer all the basic features and are available at no or nominal annual fees. 
  • Specialised credit cards: These cater to specific needs of the cardholder, such as travel privileges, dining benefits, women’s shopping benefits, etc.
  • Rewards credit cards: The cardholder earns higher points or rewards on purchases through rewards credit cards. The benefit may accrue in the form of gifts, cashback, airline miles, etc. 
  • Low-interest credit cards: These credit cards offer low or no ongoing interest during an introductory period. If the cardholder chooses to use the roll-over credit facility, the interest charges will be lower compared to a standard card. However, such cards usually do not offer exciting rewards or cashback programs.
  • Balance transfer credit cards: These types of cards can be useful for individuals who accumulated significant credit card debt and are finding it difficult to repay. The cardholder can transfer their current card debt to a new card balance and pay off the loan in 6-48 months. The payment can be interest-free or at lower charges than the previous card. 
  • Secured credit cards: This requires the cardholder to attach collateral at the time of opening the account. The card is usually sanctioned against fixed deposits or investments with the bank. The credit limit is usually estimated at about 60% to 85% of the market value of collateral placed. However, such cards usually come with higher interest charges and are recommended for individuals with bad debt or low credit scores. 

To know more about the types of credit cards, go here.

How do the new EMV chip and PIN system for credit cards work?

EMV technology is an additional security layer to prevent credit card fraud. It stands for Europay, Mastercard, and Visa and is the global technology payment standard for chip and PIN technology. The chip card and PIN are used together for chip card transactions. Users receive a four-digit number via SMS and/or email that is used to validate the transaction. An EVM card, once swiped, generates a unique transaction code for every transaction. The same transaction code cannot be used again for another transaction. 

What is the CVV number?

The Card Verification Value or the CVV number is mentioned on the back of your credit card. It is a 3-digit numeric code used for verification purposes to reduce fraud, especially for online transactions. The CVV number should not be shared with anyone, even with representatives of your card issuing company.

Am I eligible for a credit card?

The eligibility criteria and process of applying for a credit card differ from one bank to another. Anybody can apply, but only those who meet the criteria of the bank will be issued a credit card. The general conditions include the following:

  • Applicants should be at least 18 or 21 years old
  • Must be salaried or self-employed
  • Must have a savings account in their own name
  • Should have valid proof of residence 
  • A strong credit history helps and bad credit definitely does not

How long does it take to apply for and receive a credit card? 

You can submit your credit card application online or in-person by visiting the bank branch. After filling up the application form, you will need to submit document proofs such as income statement, ID copy, etc. Many banks also offer pre-approved credit cards for existing bank customers that do not require you to fill any forms or re-submit documents as long as your KYC process is in place. Your application will be processed within two weeks. If your documents are in order, it will take about a week for your new credit card to be delivered to you. 

What is the difference between a credit card and a charge card?

Charge cards offer a soft spending limit basis your income, spending habits and credit score but do not extend credit. You will need to pay your due amount within the stipulated period. Failure to do so will incur a hefty penalty. With a credit card, you have an option to pay the pending amount over time. However, you will be charged interest if you carry forward the balance due beyond the due date. 

Charge cards can be useful for consumers with strong credit and only looking to make small purchases that can be paid off in full. Credit cards, on the other hand, are universally accepted, offer a higher spending limit and offer a lot more flexibility and benefits.

What is a supplementary/add-on card?

Supplementary card or add-on-card offers an option to the primary cardholder to take an additional card for spouse, parents, siblings or children. Any expense incurred on an add-on card is billed to the primary cardholder. 

How many supplementary cards can I have and what are the charges?

Banks usually allow you to add up to three supplementary cards for family members 18 years old and above. Supplementary cards may be issued for free or cost up to Rs 1000 depending on the bank. It is important to pay your primary and supplementary card dues as per the billing cycle. 

What should I do if I lose my card or if it is stolen?

It is important to file an FIR at the nearest police station and submit an official copy to the bank while reporting the loss. It is even more important to report the loss immediately to the bank. Call the bank helpline to block the card. Internet banking can also be used to block the card and later report the loss. The bank will reissue a new card to you after due process.

Related: 5 Things To Do Immediately If You Lose Your Credit Card

What are reward points and how can I use them?

Banks give cardholders reward points on every transaction done using their credit card. It is to incentivise the cardholder to use the card more frequently for activities such as shopping, dining, travel, etc. These reward points can be redeemed later for air miles, merchandise, cash back, gift certificates etc. 

The quantum of rewards offers differ from one card issuer to another and vary depending on the feature of the card. A higher ratio of spending to rewards can also be the primary USP of some cards.

Rewards points can be redeemed using your online banking account. You only need to link your credit card number to a savings account to commence using netbanking. Accumulated points can be redeemed through phone or email too. 

You can also check your points balance through customer care and understand the process of redemption. Then fill in your redemption form and email it to customer care to be further processed and delivered. 

Some banks have a tie-up with a number of retail stores and online stores where customers can shop in exchange for accumulated redeemed points. 

What type of dining benefits can my credit card provide?

Dining benefits using your credit card may include cashback offers, cash discounts (up to a fixed percentage of your total bill) on dining bills, accelerated reward points accumulation at select restaurants, and more. 

What type of travel privileges can my credit card provide?

Travel benefits may include a discount on travel tickets booked through a specific online or retail outlet. There are many more benefits such as airline miles, reward points, cashback, discounts on travel and hotel bookings, and even access to domestic and international travel lounges. 

How can a credit card help me save on fuel costs?

The fuel surcharge is often waived when you fill at partner fuel stations. You may also earn cashback benefits at the time of the transaction. 

What are the key charges applicable to credit cards?

  • A joining fee is a fee you pay at the time of applying for a credit card. 
  • The annual fee is the fee you pay annually for having a credit card.
  • A duplicate statement fee is an amount you pay to get a hard copy of the duplicate credit card statement from the bank.
  • A late payment charge is the penalty amount you pay if you do not make the monthly bill payment in time. This is over and above the interest charged you are required to pay. 
  • A cash withdrawal charge is an amount you pay if you withdraw cash from an ATM using your credit card. 
  • A cash deposit charge is a flat fee for paying your amount due in cash, over the counter.
  • ECS or cheque return charge is the amount you pay if the ECS transaction through your credit card fails, or if the cheque is returned. 
  • A foreign currency transaction charge is a percentage value of the transaction made abroad using your credit card. 
  • The over-limit charge applies if your monthly expenses are more than the credit limit for the specified period. 
  • Card replacement/renewal fee is the amount you need to pay for renewing your credit card.

What is an annual fee?

You need to pay an annual fee for using a credit card. There are banks that do not charge an annual fee. In some cases, the annual fees may be waived by your bank if there is a waiver clause on achieving a specified expense threshold. In such cases, your annual fee effectively becomes nil for that year.

How does the card issuer decide my credit limit?

Based on the customer’s profile, income documents, repayment capacity, and the CIBIL credit score, the bank will determine the credit limit of the customer and communicate this with them. There is both a card member’s spending limit and a cash withdrawal limit. 

What happens if my card expenditure exceeds my assigned credit limit?

Exceeding your credit limit will prevent you from making additional purchases on the card and prevent scheduled ECS debits from being cleared until excess dues are cleared. Over-limit fees and applicable taxes will be charged on your credit card bill if you exceed the assigned credit limit. The over-limit fee is applicable when your credit card balance is over your credit limit through purchases, fees, or finance charges. The fee will apply only if you have a credit limit on your credit card.

Can I increase my credit limit later?

You have the option to increase the credit limit of your credit card. The cardholder needs to place a request with the bank or card issuer and submit additional documents to complete the process of raising the credit limit. Income proof is required for submission. Your past record of repayment of credit card dues and history of loans will be taken into account by the bank to arrive at the final decision. 

Related: Things To Consider Before Picking Up A Credit Card

How do I check the credit card due amount?

Your credit card statement can be checked using NetBanking, customer care, SMS alerts, via ATM, or by visiting a bank branch. Your monthly statement period and due date remain the same. Banks issue the monthly credit card statements through email and SMS, providing complete details of the credit card balance, outstanding dues, and due date of payment. These also give you information on the amount due on or before the due date, the minimum amount due and the total amount you may need to pay after the due date (including the late payment fee levied on the total payment due). Your credit card bill will include the total unpaid amount, interest charges (if any), and any other applicable charges and taxes. 

What do the terms billing date/cycle mean and are they subject to change?

The billing cycle is the period of time between billings. It is the interval of time from the end of one billing date to the next billing date for the credit card bill or statement. You can request a change in the billing cycle. This is, however, subject to the approval of the bank. 

What is the minimum payment due?

It is the lowest amount you need to pay to avoid paying a penalty for using your credit card. It is usually 5% or a certain percentage of your total outstanding balance. This is the lowest amount you can pay on your credit card to avoid penalties. The minimum amount must be paid by the due date. 

What happens if I make minimum due payments for my card?

In case you make your minimum amount payment only, interest charges will be levied on the remaining amount of your due bill. In other words, the late payment penalty will only be applied to the outstanding amount due after deduction of the minimum payment due paid. 

How can I pay my credit card bills?

Netbanking: The cardholder must register the credit card with their netbanking account. 
Cheque/draft/cash: You can pay by cheque/draft at the nearest bank branch or the ATM. 
NEFT/RTGS: This is useful if you do not have a bank account with the credit card issuer. Pay through NEFT/RTGS using the IFSC code provided by your card issuer.

What is a foreign currency transaction mark-up?

It is the transaction fee you need to pay on transacting abroad or making purchases on international websites using your credit card. This transaction fee can be up to 3.5 per cent of the transaction amount done plus GST for purchases or for withdrawing cash. 

What is a credit card balance transfer?

The transfer of balance from one credit card account to another credit card account is a credit card balance transfer. Upon completion of this process, the cardholder is no longer liable to pay money to the original bank/card issuer. Instead, they owe the debt to a second bank/card issuer. 

What does ‘zero lost card liability’ mean?

It is a credit card protection plan. It means the cardholder is not responsible or accountable for any fraudulent transaction after the loss of their card has been reported to the bank/card issuer. Any transaction charged on the cardholder’s account (after the report) will be written off by the issuer. 

How can I avail of a loan on my credit card?

A loan on the basis of a credit card is subject to approval by the bank. The cardholder can apply for a bank loan, but approval is at the sole discretion of the bank. 

To know more on how you can avail of a loan on your credit card, go here. 

How to manage/set up limits on various credit card transactions? 

You need to log in to the bank's NetBanking page/website or use the bank's Mobile Banking App to manage or set up credit card limits.

How to enable/disable credit cards for international transactions?

International transactions on a credit card can be enabled/disabled by calling the card issuer's customer care. You can also do the same online by logging on to the issuer's website.


This detailed knowledge of credit cards can come in handy for several reasons. Whether it's for your need, a family member, or a friend's, an introductory lesson in credit cards goes a long way.


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