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What is a Credit Card?

 Credit Card Meaning

Everything you need to know about Credit Cards


There has been a surge in interest as far as credit cards are concerned. Many people want to understand credit cards, know its advantages and how it can benefit them. A credit card is essentially a compact plastic or metal card issued by a financial institution. It lets you buy things by obtaining money up to a certain amount.

Other modes of transaction, including debit cards or cash, compel you to have the financial resources for compensation at the time of purchase, whereas the option to buy now and pay later outperforms them.

Credit cards help you build a credit score so you can be eligible for other financial instruments like loans and mortgages, in addition to giving you additional payment flexibility. A credit card can also provide financial benefits, as cardholders can accumulate points on every transaction, which can then be redeemed for trips, statement credits, and other items.

IDFC FIRST Bank’s credit cards come with many amazing benefits that help you save and earn more. For instance, the FIRST Classic credit card earns rewards on spends and gives amazing cashbacks.

How does a credit card work?


When you purchase in a physical store, you usually slide your credit card into a card reader, which reads the encryption chip on the card. You may be prompted to input your billing ZIP code as well. You'll be asked to input the card number, expiry date, security code (usually found on the back of the card), as well as your name and billing information, at an online website.

When you scan your credit card to pay for something, the merchant's credit card terminal checks with your credit card issuer to see if your card is legitimate and has enough capital available. Your credit card company then responds with a message indicating whether the transaction can be approved. You're good to go if it's approved. If not, your credit card may have reached its limit or been revoked owing to suspected fraudulent activity. This doesn't signify your information has been stolen; if you've made unusual purchases, your card issuer may cancel your card and contact you.

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How do credit card interest rates work?


Before you're charged interest, the credit card company gives you a grace period for repaying the whole amount you borrowed. The grace period is the time before interest is levied, which is usually between 21 and 30 days.

If you don't pay off your entire balance before the grace period ends, you'll be charged a fee or financing charge. Your finance fee is calculated using your interest rate and current balance. The yearly interest rate is the cost of borrowing money with a credit card. Market interest rates, your credit history, and the type of credit card you have are all factors that influence the interest rate of your credit card.

What are the types of credit cards available in the market?


The basic credit card


This credit card will be the best option for individuals who want to test using a credit card for the first time. You will be allocated a small credit limit based on your salary, which you can use to make purchases. When you use the card to make a purchase, you will not receive any additional perks.

Credit cards allow you to borrow money from the bank on the condition that you repay it by the due date on your bill.



The credit card for those with a low credit score


Individuals with a low credit history can obtain a secured credit card by depositing an amount equivalent to the card's credit limit. 

The credit card with no annual fees


Banks ask you to deposit a sum of money before issuing credit cards with no annual fees. The bank may return the security deposit if you make payments on time for a few months in a row.

The low-interest rate credit card


A low-interest credit card is one that has a lower interest rate than other cards in the same category. This category differs from balance transference cards in that the interest rate will not be as low as 0% and the rates will not be good for a certain period, as with the latter.

The rewards card


A rewards credit card gives you something back for every rupee you spend with it. Every bank determines the number of reward points you receive for each transaction with a rewards card, such as grocery shopping and online bill payment.

The shopping credit card


Credit cards that come with bargains and offers when used to pay for shopping expenses are known as shopping credit cards. You can earn additional incentives for both online and offline purchasing.

Hopefully, all your answers about what is a credit card and how do credit cards work have been answered. If you wish to apply for a credit card, your best bet is an online credit card. An online credit card can be obtained very easily all you need to do is go to the bank’s website and apply for a credit card of your choice. 

 

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

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