A credit card is a small, rectangular piece of plastic or metal that is issued by a bank or other financial institution and enables its holder to borrow money to pay for products and services at businesses that accept credit cards. Credit cards impose the need that cardholders repay the borrowed funds, plus any applicable interest and any other agreed-upon charges, in full or over time, either by the billing date or at a later date.
Credit cards have become an integral part of our financial lives. They allow us to make purchases, pay bills, and access credit whenever needed. With a wide range of credit cards available in the market, it’s essential to choose the right one that suits your needs and financial situation. In this article, we will focus on the top 10 credit cards in India that are easy to get approved for.
What Is a Credit Card?
A credit card is a physical payment card that allows you to get credit from a financial institution. You can use the pre-approved limit to make purchases and repay the borrowed amount with an interest each month within your billing cycle.
Understanding Credit Cards
Compared to other consumer loan types, credit cards often have a higher annual percentage rate (APR). Unless there is a 0% APR introductory offer in place for a specific period of time after account opening, interest charges on any unpaid balances charged to the card are typically assessed approximately one month after a purchase is made. If prior unpaid balances had been carried forward from a previous month, however, there is no grace period given for new charges.
Credit card companies are required by law to provide a grace period of at least 21 days before interest on purchases starts to accumulate.
Therefore, wherever possible, paying off obligations before the grace period ends is a smart practise. Knowing whether your issuer accrues interest daily or monthly is also crucial because the former results in larger interest fees for as long as the balance is unpaid. If you want to transfer your credit card balance to a card with a reduced interest rate, it’s extremely critical that you understand this. The savings from a lower rate could be offset by accidentally switching from a monthly accrual card to a daily one.
- Credit cards are plastic or metal cards that are used to pay with credit for goods or services.
- On purchases made with credit cards, interest is assessed.
- Stores, banks, and other financial institutions may issue credit cards, which frequently come with benefits like cash back, discounts, and reward miles.
- Debit cards and secured credit cards are solutions for people with poor or no credit.
Types of Credit Cards:-
Visa, Mastercard, Discover, and American Express are just a few of the popular credit cards that are often provided by banks, credit unions, or other financial institutions. Many credit cards entice users with rewards like airline miles, hotel stays, gift cards to popular stores, and cash back on purchases. Credit cards of this kind are typically referred to as rewards cards.
Building Credit History with Credit Cards
Regular, non-secured, and secured cards can all help people establish good credit histories when used appropriately. They also give people a method to shop online and get rid of the need to carry cash. Due to the fact that both secured and revolving credit cards send information about payments and purchases to the main credit bureaus, cardholders who use their cards responsibly can increase their credit scores, perhaps increase their available credit limits, and in the case of secured cards, possibly upgrade to a regular credit card.
How do I get a credit card if I don’t have any credit?
It might be a bit of a catch-22 to establish credit history. Since you are an unproven borrower if you have no credit, businesses and banks are less likely to provide you credit. One of the simplest ways to begin is to open a secured credit card. There is no danger for the lender because spenders are only borrowing from the money they put down as a deposit, and it gives them an overview of your spending and repayment history.
Becoming an authorised user on an established credit account, such as a parent or spouse, is another approach to begin developing credit. Your account will show the cardholder’s credit history, giving your credit report more lifespan.
Do credit cards have fixed or variable annual percentage rates (APRs)?
Both forms of annual percentage rates (APRs) are present on a large number of credit cards. Read the cardholder agreement that comes with your credit card to learn what kind of APR you have. Legally, credit card companies are required to state the type of APR they have and what it is. They must also inform consumers if a fixed APR changes.
Some credit cards feature variable APRs for cash advances and late payments but fixed APRs for purchases. To be certain, read the fine print.
What is a credit card annual fee?
The charge made by the credit card company to give you a credit card is known as the annual fee. Some credit cards have no annual fee, while others—usually those that offer prizes or incentives like cash back—can levy fees between $50 and $700.
Credit Cards vs. Debit Cards: What’s the Difference?
1- Credit Cards vs. Debit Cards: An Overview
With 16-digit card numbers, expiration dates, magnetic stripes, and EMV chips, credit cards and debit cards often have a very similar appearance. With one significant exception, both can make it simple and convenient to make purchases offline or online. With the use of debit cards, you can make purchases using money that has been deposited in a bank. With credit cards, you can borrow money from the card issuer up to a predetermined limit in order to make purchases or cash withdrawals.
Most likely, you carry a debit card and at least one credit card in your wallet.
- While debit cards take money directly out of your bank account, credit cards allow you access to a line of credit provided by a bank.
- In comparison to debit cards connected to a bank account, credit cards offer higher consumer protections against fraud.
- While many credit cards no longer have annual fees, more recent debit cards provide protection similar to that of credit cards.
- It’s crucial to take the costs and advantages into account when contrasting credit cards with debit cards connected to a bank account.
What Is a Credit Card? And Should You Own One?
Credit cards can increase your purchasing power and are an excellent method to establish credit. Learn what a credit card is so that you can use one to your advantage.
With a credit card, you can borrow money from a bank on the condition that you’ll pay it back by the due date or pay interest.
Compared to other methods of payment, such as cash or debit cards, which both demand that you have the money available at the moment of purchase, the flexibility to buy now and pay later is superior. Credit cards not only give you additional payment flexibility but also help you build credit so you can be approved for other financial products like loans and mortgages.
How credit cards work
Credit cards are rectangular pieces of plastic or metal that can be swiped, tapped, or inserted into a card reader at the register to pay for new transactions. Additionally, a lot of credit cards enable balance transfers, giving you the chance to pay off debt.
When you apply for a credit card, you are given a credit limit that may be in the few hundred to several thousand dollar range. You may spend just up to that amount.
When you use your card to make a transaction, it will initially appear as pending on your account but will eventually post. Your account balance will go up as soon as the transaction is recorded.
Every month you should anticipate receiving a charge from your card issuer that includes all the posted purchases you made over your billing period. You must pay at least the minimum amount by your due date (which is the same day each month) in order to keep your account in good standing.
Fortunately, most credit cards provide grace periods, which give you a minimum of 21 days from the conclusion of a billing cycle to pay off your debt without incurring interest. Interest will be charged on any outstanding balances beyond the grace period, so we advise you to always pay in full.
Common credit card terms
Numerous terms that govern the fees you may be charged when using your credit card are included with credit cards. These are the most typical words:
- Annual fee: The sum that cardholders must pay each year to keep their credit cards active.
- The interest rate for balance transfers, which may be the same as or higher than the APR for purchases, is known as the balance transfer APR.
- Balance transfer fees can range from 3% to 5% per transfer when moving debt between credit cards.
- The interest rate you pay if you obtain a cash advance, which is frequently one of the highest APRs possible.
Types of credit cards
Consumers have access to thousands of credit cards, making it challenging to choose just one. Fortunately, most credit cards fit into one of a few categories, allowing you to focus your search. Here are some examples of several credit card categories:
- Cards with 0% APR: Many cards offer interest-free loan terms that can last up to a year. The best cards include 0% APR durations that are 15, 18, 20, and 21 months long. For instance, the U.S. Bank Visa® Platinum Card offers 0% on balance transfers and purchases for the first 18 billing cycles before applying a variable APR ranging from 19.49% to 29.49%. Transfers must be made 60 days after the account is opened.
- Rewards cards: These are a terrific option if you want to earn cash back, points, or miles on all of your purchases. Every transaction you make will normally earn you at least 1% or 1X back, and the top cards provide four times that on a range of expenditures from grocery and meal delivery to petrol and travel.
- Secured cards: Applying for a secured card is one of the greatest solutions for those with poor credit or no credit history. These cards function like conventional, unsecured cards but demand a deposit (typically $200) before you can acquire a credit line. Some cards, like the Capital One Platinum Secured Credit Card, may even provide you the opportunity to get approved for a $49 or $99 deposit as low as possible.
- Business cards: Opening a card with benefits targeted towards typical business expenses, such shipping and travel, as well as introducing 0% APR periods, can be beneficial for business owners. Additionally, opening employee cards with these cards simplifies expenses.
How Do Credit Cards Work? A Beginner’s Guide ?
You may be curious about how credit cards operate if you’re new to the world of credit. When you first start using credit cards, there is a lot to learn, and ignorance can end up losing you money.
All the fundamentals of credit cards are covered in this beginner’s tutorial. You’ll discover all the details you need to know about using credit cards, including how they operate and how to pick the ideal first card.
A credit account with a financial institution is connected to a credit card. You are borrowing money from the credit card company each time you use the card. Any retailer that takes credit cards will let you use your card to make a purchase of products or services. A cash advance is also possible with some cards, although it’s not advised due to the large fees.
The balance on a credit card refers to the amount you owe. A $100 purchase would result in a $100 rise in the balance on your card.
There is a credit limit on each credit card, which is the most you can ever owe the bank. For instance, if the credit limit on your card is $1,000, the debt cannot be higher.
What Is A Credit Card? | Bankrate
We at Bankrate are committed to assisting you in making wiser financial decisions. Even though we strictly uphold editorial integrity, this post might mention products from our partners. Here is a description of our revenue generation process. Although the information on this page is correct as of the posting date, some of the referenced incentives may have already expired. The offers provided on this page are subject to terms. Any thoughts, evaluations, analyses, or recommendations are the sole property of the author and have not been subject to any kind of review, approval, or endorsement on the part of any card issuer.
- You can get a line of credit that functions as a loan using a credit card.
- You can use your credit card to increase your credit score and reduce your interest payments.
- Debit cards are different from credit cards in that you can only access your own money in the bank and that they provide less protection than credit cards.
- With a credit card, it is simple to overspend, so you should use it responsibly to prevent building up a balance that you would have to pay interest on.
A bank will provide you with a credit card as a form of loan, giving you access to a revolving credit line through your card account. You can use the credit limit on the loan that underpins your credit card for little and large purchases alike. If you don’t pay off the balance on your card each month, interest, or APR, which is added to your bill like it is with traditional loans, will accrue on your credit limit.
If you use your credit cards more than you can afford to pay back each month, debt may result. However, when used responsibly, a credit card can be a strong financial tool and a vital component of establishing credit.
How do credit cards actually work?
A credit card is just a modest loan from the issuing bank, to put it simply. While some people may view credit cards as “free money,” in reality, your credit limit is a loan with an APR that will be applied to you as the cardholder if you don’t pay off your balance at the end of a billing cycle.
Your account will be given a credit limit when the bank approves your request for a credit card. This credit limit is the most the bank will permit you to spend using the card. Your credit card limit is determined by a variety of factors, including your income, obligations, credit history, and others.
Important credit card terms
Finding the ideal credit card for your needs requires understanding a number of words that may be foreign or perplexing when considering applying for a credit card. The following are some of the most typical terms you could hear:
- Interest is a cost that banks assess on the credit lines they grant to its clients. Interest rates vary depending on the card and the applicant’s credit score. If you carry a balance from month to month, interest will be added.
- Annual percentage rate (APR): The interest rate on a credit card is also referred to as the APR. In the case of credit card financing, an APR often equals the interest rate and represents the overall cost of financing a financial debt. The average annual percentage rate (APR) is between 12 and 24 percent.
- A credit card balance is the difference between the money you have spent and the amount you owe the credit card issuer at the conclusion of your billing cycle.
- Money advance When you use your credit card to withdraw money, that is a cash advance. Cash advances have no grace period, significant fees, and are not advised unless absolutely necessary.
Pros and cons of using credit cards
There are many benefits to using credit cards, but you should be aware of some disadvantages as well.
- Most of the time, adopting wise credit habits can help you avoid the drawbacks of credit cards. For instance, if you consistently pay your credit card balance on time, you won’t ever need to be concerned about how a late payment may impact your credit score. You won’t have to worry about getting into or out of credit card debt in the future if you maintain your credit card purchases inside your spending limit.
Things you need to know about credit cards
Prior to applying for and using a credit card, you should bear the following in mind:
- When you apply, the credit card company will run a hard credit check. Your credit report will be checked as part of this. Your chances of getting approved for credit are increased if you have a strong credit rating. Additionally, it can grant you access to credit cards with the best promotional deals and/or interest rates. Your credit report will reflect a hard credit check, which could lower your credit score.
- Before you apply, certain credit companies will run a mild check. This kind of credit inquiry won’t affect your credit score and won’t appear on your credit record. It gives a hint as to whether or not your credit application will be approved.
- If the card issuer approves your application, they will assign you a pre-determined credit limit. The maximum amount you can charge to the card ranges from a few hundred to several thousand pounds.
- Due to costs, credit cards are not ideal for cash withdrawals. If you do use your credit card to make a cash withdrawal, you’ll typically be charged a fee as well as interest (at a higher rate) from the day you withdraw the money.
Importance of Credit Cards
1- Convenience and Security
Credit cards offer unparalleled convenience and security. They eliminate the need to carry cash and provide a secure payment method, especially for online transactions. With features like contactless payments and mobile wallets, credit cards have made shopping and payments easier than ever before.
2- Building Credit Score
Possessing a credit card and using it sensibly are great ways to get a good credit history. For a variety of financial transactions, including borrowing money or qualifying for a mortgage, a strong credit rating is essential. You may build a strong credit history by appropriately utilising credit cards and paying your bills on time.
3- Reward Programs
You can earn points, money, or air miles on your purchases with many credit cards’ reward programmes. These incentives, which sometimes include large discounts or free travel, can soon accumulate. You may get the most out of your regular spending if you have the correct credit card.
The history of credit cards
Simply tap your card at a payment terminal, wait while it processes, then think about what it has replaced to truly appreciate the modern convenience of credit cards.
Before the invention of plastic, using money to exchange goods and services was inconvenient, if not downright dangerous. From cattle and camels, which were first used as cash around 9,000 B.C., through cowrie shells, bronze and copper imitations of cowrie shells, gold and silver nuggets, Chinese deerskin notes, and Native American stringed wampum beads, the forms of currency have been extremely bizarre.
Credit cards have always offered a number of advantages over other payment methods, including being portable, pocket-sized, generally secure, and lacking any inherent value. True credit cards also provide you extra time to pay your debt.
Images for what is credit cards?
1. Accrued interest adds up on credit cards:-
You will wind up paying more in interest than the initial amount of your purchases if you don’t pay off the entire balance on your credit card each month.
With interest charges increasing with increasing balances, that $50 pair of shoes may eventually wind up costing you $100 or more. Since interest accumulates, you are essentially paying interest on top of the interest that you already have each month.
2. Paying with cash vs. credit helps you keep your debt in check:-
Debt can accumulate quickly, yet it can be difficult to break out of. If you don’t pay your bills in full each month, you’re not only spending more money overall over time on items, but you’re also piling up more debt.
Wouldn’t it be good to believe that after making a purchase, you’re done with it and won’t have to worry about paying for it for months or even years?
3. Cash makes it easier to budget and stick to it:-
It’s simpler to keep track of your expenditures when you pay with the cash you’ve budgeted for items. It also serves as an eye opener and serves to keep you grounded in reality regarding how much money is coming in and going out from week to week or month to month.
These are just a few of the benefits of paying with cash as opposed to a credit card. That’s not to say there aren’t situations or times when using a credit card makes sense, but you should always use caution and have a repayment strategy in place.
Typically, applicants must meet minimum credit score requirements set by credit card issuers. A credit score, which is based on a person’s credit history, is a numerical indication of their creditworthiness. It’s critical to review a credit card’s credit score standards. Credit cards are payment cards that give customers the option of borrowing money from a financial institution in order to make purchases or cash withdrawals. They provide a revolving line of credit, which allows borrowers to repay their debt in full or in part while still accruing interest on the outstanding sum. Credit cards have become extremely popular in India as a result of the ease with which they may be used for transactions and the numerous advantages they offer, like rewards points, cashback, discounts, and special privileges.