Credit Card is a financial instrument issued by banks to borrowers that can be used to purchase goods and make online transactions. Credit Card is a form of debt. The billing cycle of Credit Cards is usually 30 days. Periodic repayments must be made to avail continued services from the lender.
As utilization of Credit Card is a form of debt, the repayment involves interest. You don’t have to pay interest if you repay within a certain period called billing cycle + grace period. Borrowers can utilize their Credit Card up to a certain amount called Credit Limit, which is predetermined by the lender.
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1) Secured Credit Cards: These cards require borrowers to provide security in the form of a fixed deposit against their Credit Card. Credit Limit of these cards is 80% of the value of fixed deposit. The borrowers need to make timely repayments, and defaulting would result in lender liquidating the fixed deposit to recover the dues. Secured Credit Cards can be availed by those individuals who have a bad Credit Score. They can improve their Credit Score by availing Secured Credit Cards and making timely repayments.
2) Prepaid Credit Cards: These cards require borrowers to load money in the Credit Card up front and then utilize the same. The Credit Limit would be renewed only on loading money to the card. Credit Score would not be impacted by using prepaid cards. Prepaid Credit Cards work on similar lines of Debit Card, except that Prepaid Credit Cards don’t have a bank account linked to them.
3) Credit Cards For Women: These cards are designed to attract women. These cards offer various benefits like discount on specific merchandise, cashbacks and so on. Women who use these credit cards get bonus reward points, waiver on fuel charges, cut on insurance premiums and so on. Many of these credit cards offer amazing travel benefits to women who love travelling regularly.
4) Business Credit Cards: These cards are designed for companies/organizations. These cards have high credit limit. If your business defaults on the credit card, you (owner of the business) are held liable and have to make the repayment. Business Credit Cards offer unique benefits to business owners like cash back on purchases from certain stores, where you (businessman) are most likely to shop or a huge sign-up bonus or some travel perks.
SEE ALSO: How to maintain a good CIBIL score?
Availing a Credit Card is subject to meeting the eligibility criteria set by the lender. Each lender has their own eligibility criteria to issue Credit Cards to the applicants. Following are the general eligibility criteria:
· The applicant must be at least 18 years old but not more than 65 years.
· The applicant must have a stable income either by way of a salary or business.
· If the applicant is self employed, his/her business must have steady track record of profits over the last two years.
· The applicant must have a good credit score.
SEE ALSO: Best Travel Credit Cards 2018
Offline applications can be made by visiting the lenders’ branch. You need to manually fill and submit the application form along with the required documents in person. An online application can be made by logging on to lenders’ website and filling out the online application.
The applicants must produce Identity Proof, Address Proof and a latest photograph along with the filled application form. The applicant must possess PAN to apply for a Credit Card.
Following documents are accepted as Identity Proof:
· Voter ID
· Valid Passport
· Class X Marks Card
· PAN Card
Following documents are accepted as Address Proof:
· Electricity Bill
· Water Bill
· Telephone Bill
· Bank Passbook
· Valid Passport
· Voter ID
It is critical to use your Credit Card wisely, as it has direct impact on your Credit Score. Any missed payments would show up in your credit report. Ensure timely repayments to avoid interest and late payment penalty charges on the card. Keep credit utilization ratio low. Maximum utilization of the Credit Card shows you to be credit hungry and has negative impact on your Credit Score. Try and cap your credit utilization at 30%.
Use your Credit Card only when there is a need for it. There are a few merchandises, restaurants and so on, tied up with your Credit Card that offers cashbacks, reward points and discounts on the payments made through Credit Card. It makes sense for you to use your Credit Card at these places. Using Credit Card smartly gives lot of benefits.
Your Credit Score improves when the right usage of the Credit Card is made. Credit Cards are not for individuals who are struggling with their finances, rather it is for those who are financially well-off.
Lenders don’t charge interest if the repayments are made within the billing cycle plus grace period. Grace period is in place to facilitate the use of Credit Cards. Interest rates on Credit Card vary across lenders. Delay in repayment would attract interest plus penalty charges. Below table shows the interest rates offered by the popular lenders.
2.50% to 3.25%
2.49% to 3.50%
3.10% to 3.25%
2.49% to 3.35%
3.10% to 3.49%
1.99% to 3.50%
· If you are having a bad Credit Score and need to avail Home Loan in the future, then you must avail a Credit Card and improve your Credit Score by making timely repayments. No Bank offers loans to those individuals having bad Credit Score.
· Credit Cards provide reward points on spending a certain amount. These reward points can be utilized on shopping, dining and so on.
· Credit Cards have alliances with popular merchandises and restaurants. Using your Credit Card at these places would fetch discounts and cashbacks.
· Credit Cards come in handy when you are short of cash at the month end.
Most lenders have 24/7 customer care services to help customers (card holders) with all their queries. With high competition, the quality of the customer care service might be a deciding factor for customers to choose the lender. Modern World is more prone to fraud and this can happen anytime, hence it is important for the lenders to be available at any time so that the customers can reach out to them for reporting any kind of suspicious activities happening on their cards.
Making a positive or negative impact on your Credit Score, using a Credit Card completely depends on you. Right use of Credit Card can do wonders to Credit Score. At the same time, you need to be aware of the fact that abusing a Credit Card has long term impact on Credit Score.
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