Banks charge a particular percentage as the interest rate on the borrowed amount and this is applicable if the monthly outstanding amount has not been repaid by the card holder. The interest rate is calculated as the Annual Percentage Rate (APR) and always depends on the type of credit card held. The applicable finance charges are determined on a monthly interest rate percentage and is generally calculated on the average daily balance basis for credit cards. While picking up a credit card, customer can always compare the APRs offered on each card and then choose according to their requirements. Customers who can make regular monthly repayments, can choose credit cards with rewards programs and travel loyalty programs. These type of credit cards tend to have a slightly higher APR. If a customer is looking for flexibility with regards to payments and mainly for purchases, then a credit card with a lower APR should be taken. The APR is always determined based on the applicant’s credit score by any financial institution. All banks offer an interest free period ranging from 20 to 50 days to credit card holders as an additional feature.

Of course, the million dollar question. While the mechanics of using a credit card on a day-to-day basis isn’t too complicated, the associated back-end process associated with a simple card swipe is too technical for a common individual to comprehend. In actuality, the procedure is very simple and safe-

1. Purchase over, you hand the credit card to the retailer to pay for your purchase. He swipes, with an accompanying smile, of course.
2. The merchant’s Point of Sale (POS) system is connected to the merchant’s bank via a communication link.
3. Thanks to the POS system, your details are verified in real-time using the electronic verification system by the merchant’s bank. The verification is with regards to your credentials, validity of the card and availability of sufficient balance to pay for the purchase.
4. Post the verification from the merchant’s bank, the details are forwarded to your bank for payment authorization if all the information is in order.
5. When the merchant’s bank receives this authorization, it blocks the requisite amount from your credit limit to account for the purchase later on. Next, it generates an approval code that is transmitted to the merchant.
6. At the merchant outlet where you stand for the clearance to affect quickly, the retailer receives this code and must key it in to obtain two charge slip copies from the POS system. One of these slips signifies your agreement with the card issuing bank to pay for the current purchase. You sign on this slip and return it back to the retailer. The other copy is yours to take away from this transaction.
7. Safe, comprehensive and fast, all of these steps were affected in less than 2 minutes. Neat, right?

Borrowing from a popular axiom, ‘With great power comes great responsibility’, and the same holds very true in the case of credit cards. While a handy financial help, a source of ready cash and a safe and beneficial way to pay for your purchases, the misuse of this facility could be detrimental to your long term financial health. Credit card debt, defaulting on your monthly repayments or drawing up a massive pile of credit card purchases and consequently, a stiff interest rate are things to be constantly aware of. The best way to enjoy your credit card is responsibly and with caution and tolerance. While the temptation may be high to unleash a shopping spree with your brand new credit card, remember, the money you spend is not your own- it must be returned back, with interest and on time!!

1. What is a credit card?

   A credit card can be used to purchase services and goods on borrowed credit from the bank that has issued the card. Every credit card comes with various privileges and benefits to suit the lifestyle of a customer.

2. What are the key benefits that Premium credit cards offer?

   Premier credit cards are signature cards from banks which come with flexible spending limits, lifestyle privileges, travel benefits, cashback offers, VIP lounge access, concierge services emergency assistance and complimentary insurance cover. Most premium credit cards can be procured only through invitation.

3. How is redemption done on a cashback credit card?

   The cashback that is earned by a customer can be automatically got as statement credit from the bank.

4. How is a secured credit card issued by a bank?

   A secured credit card is generally issued against a fixed deposit, which has been placed by the customer while availing the card. Any minimum amount due or late payment fee that has to be paid will be taken from the deposit. Secured credit cards help customer build a good credit history

5. How does a prepaid credit card work?

   A prepaid credit card works like a debit card, where the money is taken from an account associated with the card. Users can load cash on the prepaid credit card and can spend up to the available amount limit on the card.

6. What are the features of a Business credit card?

   Business credit cards come with features like business savings plans, rewards programs, cash advance facility, lounge access and customers can also get their company name embossed on the card.

7. How can a customer select the best suited card for himself?

   Any customer should select a credit card according to his everyday needs and lifestyle requirements. The privileges offered with a particular credit card should be beneficial and should add value to a customer.

8. Can a credit card be procured by any individual in India?

   A credit card can be procured by an individual with a regular income and also having a good credit score. Most banks mandate that applicants should be above a certain age limit and should also meet a stipulated income criteria.

9. What is the minimum criteria for applying a credit card in India?

   The minimum requirement to be met while applying for a credit card would be the age criteria. According to the bank, the age criteria varies from 18 to 21 years for a credit card approval to be got.

10. What are the key benefits of the balance transfer option on a credit card?

    Customers can easily consolidate multiple credit card balances onto a single card and repay back with flexible tenure options at low interest rates.

11. Do banks levy any balance transfer fees on customers choosing this option on their credit cards?

    Yes, most banks generally levy a certain percentage as processing fee, when a balance transfer on a credit card is done. The processing fee varies with different banks and customers have to pay this amount with the first monthly instalment.

12. How can users check the available credit on their credit cards?

    Credit card holders can refer to their monthly statements to get the available credit limit. The other options offered to customers are via SMS banking or internet banking services. All banks provide these facilities, where customers can check the available credit by sending an SMS and receiving an alert or by accessing the statements on their internet banking accounts.

13. What are the highlights of the introductory period of a credit card balance transfer?

    When a credit card balance transfer is done, every bank offers an interest free introductory period to the credit card holder. This interest free payment period ranges from 3 to 6 months after which the card holder has to repay the instalments with an additional interest rate.

14. What are the type of purchases that can be made using a credit card?

    A credit card can be used to purchase goods, book travel tickets, perform online transactions and also make reservations for services.

15. Do credit card issuers in India offer co-branded credit cards?

    Yes, there are various co-branded credit cards available in the market from different card issuers. The privileges available in a co-branded credit card are generally determined by the issuing bank.

16. Can customers increase the predetermined credit limits on their credit cards?

    Yes, most banks give the option of increasing the credit limit available based on the usage pattern. Sometimes the banks might automatically increase the credit limit after reviewing the customer’s spending pattern. Otherwise if a cardholder wishes to increment the credit limit, then a special request has to be placed with the concerned bank.

17. What is a Purchase introductory rate?

    The purchase introductory rate is the low interest rate that is offered during the first few months of the credit card usage. This introductory rate is generally given to customers with good credit scores. These rates might be applied only to purchase transactions or balance transfers done by the card holder.

18. Do credit cards come with specific cash withdrawal limits?

    Yes, most credit cards come with preset cash withdrawal limits, which is generally communicated by the bank to the customer at the time of approval. Banks might also levy additional withdrawal charges on every transaction done at an ATM within India or abroad.

19. How does a credit card work as a cashless payment instrument?

    A credit card is a payment card issued by a particular bank for customers looking to avail instant credits to easily purchase goods and services without spending a single penny from their pockets. The bank extends a line of credit with which the user borrows money, to be paid to a merchant. The cardholder is required to pay back the borrowed sum of money subsequently to the lender bank along with extra interest rates.

20. How do I own a credit card in India?

    Customers need to get in touch with an executive from a bank of their choice and submit a filled-in application form with the required documents. The bank will process your application after appraising your credit history and will then approve the new credit card according to your requirements.

21. How important is it to understand the interest rate charged by a bank on a particular credit card?

    In India, banks charge the highest rate of interests for credit cards, from 36% to 42% per annum. A bank decides the interest rate for a particular customer based on his credit history, financial capability and also depending on the type of card he chooses. Applicants with good credit scores and regular payment patterns get the best deals on their credit card interest rates.

22. What are the different payment networks utilized by banks in India for credit card transactions?

    Banks in India have tied up with Visa, MasterCard and American Express (AMEX) to process credit card payments, connecting merchant accounts with the acquiring banks.

23. What are the eligibility requirements to be fulfilled while acquiring a credit card?

    In India, banks generally offer credit cards to individuals above the age of 21 and with a steady monthly income. As part of their verification process, banks do a deep dive into the customer’s credit history and assess previous payment patterns to understand the customer’s financial situation. Only after ensuring that the applicant has the financial capability to repay the expenses incurred using a credit card, will the bank approve the customer’s application.

24. Is there a minimum salary criterion required to be met while applying for credit cards in India?

    Yes, in India applicants are required to earn a minimum of Rs 75,000 to 1 Lakh per annum, though this criterion varies depending on the type of the card.

25. What does APR refer to with respect to a credit card?

    Annual Percentage Rate (APR) or the ‘’cost’’ at which a customer takes credit from a bank, is the simple interest rate charged by a bank on expenses incurred on a credit card for a year.

26. Do banks levy any charges for late payment of credit card bills?

    The best mantra while managing a credit card is to ‘’Pay as and when you can”. Delaying a credit card payment is not a wise option, as banks tend to impose high late payment fees and gradually increase the interest rates charged. The customer would actually end up paying way more than his original purchase amount.

27. Do add-on or supplementary cards carry the same features as their primary credit cards?

    Add-on cards can be taken for family members of the primary card holder with extra charges anywhere between Rs 125 to Rs 1000. The credit limit of the primary card gets carried over to the new card with similar features. Also customers can get a comprehensive bill with details of both the cards.

28. How do global cards help a frequent traveller?

    Global credit cards give a customer the leeway of instantly performing cashless transactions from any corner of the globe. Accepted worldwide, global cards give you the flexibility of spending in any foreign currency and later paying your bills in your local currency. A customer can also avoid the hassle of carrying huge amounts of cash or using traveller’s checks.

29. What do credit card reward programs offer?

    Credit card reward programs have been introduced by lenders to popularize the various cards they offer by rewarding a customer for transacting using their credit card. The cardholder is awarded points as per his expenditure for purchasing goods and services. The accumulated points can later be redeemed by customers for certain discounts and gifts as per the bank’s guidelines.

30. What measures are Indian banks required to take to avoid credit card fraud?

    The Reserve Bank of India mandates the provision of multiple levels of authentication from banks, for customers using credit cards to make an online purchases. Additionally, customers are advised by banks to use their credit card credentials only in encrypted internet connections to avoid fraudulent transactions.

31. How does the cash advance facility help an Indian credit card holder?

    Customers can also use their credit cards as ATM cards and withdraw a stipulated amount of cash, preset by the bank as cash advance. Though this feature gives a customer access to instant cash, the bank charges very high interest rates for credit taken using this facility.

32. What are the different online and offline modes available to customers for making credit card bill payments?

    A. Customers can make outstanding credit card bill payments using the following online modes - Net Banking, NEFT / RTGS Transfers, Debit Cards, Mobile Applications, Standing Instructions, Visa Money Transfer, Bill Desk, etc. Offline modes include cash, cheques, demand drafts, etc.