A credit card, like a debit card, is used to make purchases.
A credit card, unlike a debit card, allows you to make purchases using borrowed funds rather than monies from your bank account.
The key to responsibly using a credit card is to pay off your amount in full each month to avoid going into debt and incurring interest costs.
Credit card meaning
A credit card meaning is a compact plastic or metal card that a financial institution issues. It lets you buy things by borrowing money up to a certain amount.
A credit card gives you access to a credit limit set by your credit card company. The maximum amount you can borrow is determined by your credit limit. Instead of giving you the entire amount in cash, the credit card company allows you to use as much of your credit limit as you wish at any given time. You can borrow again once you’ve paid off what you’ve borrowed.
How do credit cards work?
Credit cards, like debit cards, are issued by a bank or credit union and are associated with a specific account. When you hand over your credit card, it launches a transaction that looks exactly like a debit transaction: amount requested. A card has been presented to you. The transaction has been completed. Behind the scenes, though, the procedure is rather different.
When you pay using a debit card, the total is deducted from a previously earned sum. If you spend that amount close to zero, you’ll need to put more money in to keep using your card, or you’ll be charged an overdraft fee.
A credit card, on the other hand, allows you to spend money that you haven’t yet earned – up to a certain limit known as your credit limit. When you make a purchase, your bank essentially places a hold on the funds, knowing that you’ll pay it back in full when your balance is due. And that if you don’t, you’ll be penalized with interest.
How to apply for a credit card?
In most cases, you can apply for a credit card online in a few easy steps, but it’s crucial to know what’s included in an online card application. Gather all of the information you’ll need before you begin to make the process go more smoothly.
Qualifying for a credit card
The two most essential elements that determine your credit card eligibility are your credit history and payback capacity. Before offering a credit facility, the card-issuing bank will evaluate your creditworthiness.
Typically, the bank would look for the following parameters:
- Indian national with legitimate evidence of residency.
- A minimum of six months of regular credit history and a credit score of at least 700 are required.
- A monthly income of INR 20,000 is required.
- Minimum age of 21 is required.
- Your current income and credit usage patterns.
Steps to apply for a credit card in India
1. Understand the type of credit card that you need
Choose your free credit card apply based on your preferences- if you travel frequently, you will need a travel credit card. To get offers on movie tickets, there is an entertainment credit card and the list goes on.
2. Ensure that you fulfill the eligibility criteria before you apply for a credit card
Make a checklist of the eligibility criteria before applying for a credit card. We have mentioned the factors above that are responsible for qualifying for a credit card.
3. Have the documents ready
After confirming that you are eligible for a credit card, you need to make sure that you have all the necessary documents before you apply for a credit card.
- an income proof in the form of IT returns
- payslip
- bank account statements
4. Fill in the application
Once you have decided on the card that you want and ensured that you have the required documents, the next step will be deciding on the bank and filling out an application form. You can do it online or offline.