What Does A Credit Card Mean?
A type of credit facility that banks offer to their consumers is a credit card, which allows customers to borrow funds up to a fixed credit limit. Customers can transact for goods and services using it. The credit card provider establishes the credit limit based on various factors, including income and credit score.
The History Of Credit?
Credit systems have existed for as long as there have been civilized humans, but credit cards we use today are an American invention. A line of credit is what we would now consider to be used for practically all economic transactions during the Bronze Age. This credit structure developed as a result of the months-long interval between planting and harvesting a crop.
As per the analysis of American economist Michael Hudson, throughout the growing season, our ancestors would frequently accumulate debt which they would subsequently settle during harvest season. Approximately 5,000 years ago, Mesopotamian Ancient civilization employed clay tablets for trade with other countries, which was the first known transaction that served as the basis for our current credit card system.
Type Of Credit Card
In India, numerous credit card issuers provide a variety of credit cards with various feature sets. Card issuers typically divide their credit card products into various groups according to the benefits they provide.
The following are a few of the most popular credit card categories:
- Credit cards with rewards.
- Credit cards with cashback.
- Credit-building credit cards.
- Cards with low interest rates and balance transfers.
Moreover, credit cards can also be categorized according to the type of benefits they offer, including:
- Cards for Travelling
- Gas Cards
- Cards for entertainment
- Purchase Cards
- Card Designs for a Lifestyle
Once you've decided to apply for a credit card, you should be aware of the various kinds that are out there.
The First Credit Card In India
While the Diner's Club card was first established by City Bank in 1969, it was not until Andhra Bank (is now merged with Union Bank of India) released its credit card that the credit card business began to gain traction. In 1985, Vysya Bank and United Bank of India launched the Central Card in collaboration with the Central Bank of India. Together, Allahabad Bank ( Currently Indian Bank) and Bank of Baroda introduced the Bob Card that same year.
The Visa Classic Card was introduced by ANZ Grindlays Bank in 1989. With a compound annual growth rate of 25–30%, the number of credit cards in India has increased significantly since then. According to RBI estimates, there were 28.8 million credit cards in use in India as of January 2017. Nevertheless, as of right now, India has 661.8 million debit cards. There's no denying that Indians continue to favor.
Credit Card Benefits
Like a coin, credit cards have two sides. Everything has pros and cons. You should make an informed decision about whether you need to buy a credit card since, when used responsibly, it can never have a bad financial impact. However, it also enables you to better your financial status.
For a maximum period of 50 days after the date of payment, the credit card company will allow you to pay off the total amount without paying interest.
The cardholder can also pay the minimum balance, generally between 5% and 10% of the total amount due, to avoid a penalty. However, the amount will be carried over to the next month and interest will be levied by the credit card company.
1. Flexibility To Finance Purchases
Using credit cards for transactions completed without paying immediately is one of the main reasons people use them. With a credit card, you can make at least every month and charge items up to the limit of your credit. Monthly balance transfers are possible with most credit cards. In case you carry an amount that is not paid off properly, the card issuer will add interest. Only a small percentage of people use charge cards, which demand monthly payments in full for the outstanding balance.
2. Protection Against Fraud
Because credit cards come with provided fraud protection, they're amongst the safer payment methods. If the card is lost or stolen, you won't be charged with any fraudulent transactions since most cards have no responsibility for unauthorized charges.
To protect customers, card issuers regularly add extra features and services. Card-locking systems, virtual card numbers, and alerts from security systems for suspicious activities are typical features.
3. Quick Acceptance Of Loans
You can get bank loans through credit cards. Your bank will then transfer funds to your bank account, paying the amount from your available credit limit. The requested loan amount will be transferred to your bank account within just a few seconds after the loan is granted. It is essential to remember that good credit ratings and a history of borrowing can also improve your credit score.
4. Get Rewards
It is difficult to talk about credit card advantages without mentioning benefits. You can get advantages for using a credit card in various cases. There are many kinds of credit cards with rewards, such as store cards, co-branded flight and resort rewards cards, cashback cards, and reward travel cards.
With every amount you spend, credit cards with rewards could give you points. Your points can be redeemed for items, gift cards, cashback, e-commerce purchases, travel, and bill credits, among other things. Options for redemption will differ amongst cards.
5. Expense Log
All of the transactions you made using a credit card are recorded. You can view all of this in your credit card statement. You can better manage your finances and create a monthly budget if you maintain a proper record of every transaction you make with your credit card.
Some Disadvantages of Having a Credit Card
- The Credit Card Balance Is Visible
Indebtedness isn't always a bad thing, but if you have an excessive amount of credit card debt, you should put the cards away till you get the money to pay them off. Usually, credit cards charge higher interest rates than other loans, which makes it simpler for balances to accumulate—especially if you only make the minimum payments each month.
- Overspending
Since credit cards offer you credit in a big way, there may be times when you use the available amount to make dangerous purchases and end yourself in debt later on.
- Solution
To prevent overspending, you should never use more than 50% to 60% of your credit limit on a credit card. You may avoid going overboard and, consequently, avoid getting into debt by making sure of this and closely monitoring your unnecessary expenditures.
- Excessive Fees
You might be charged a surcharge, which is an additional fee if you use a credit card to purchase a specific amount. Nonetheless, this amount typically covers the cost of fuel and train reservations.
- Resolution
There are certain credit cards, like the gasoline credit card, that don't charge extra for petrol. The bank typically waives the surcharge cost if the transaction value is within a certain range. There can be a cap on the monthly fee waiver amount as well.
How to open a Credit Card and its Eligibility?
A credit card is a useful tool for all of your purchasing needs. It is the most practical method of going cashless without having money taken out of your bank account. Everybody has different financial needs and spending habits. There are many Credit Cards in the market to meet these various demands. We look at the variety of credit cards available, as well as the rewards and offers that come along with each.
Credit Card Eligibility Criteria Factors
- Age: You have to be eighteen (18) years old. However, a minimum age of 21 years is set by some banks & there are some differences in the maximum age requirement, which is usually 60 years old.
- Annual Salary: Your eligibility for any given card is based on your annual income.
- Cibil: Your credit card request will be rejected if your credit score is too low. Before applying for a credit card, it is advisable to check your credit score, create your credit profile, and be aware of your credit situation. In this way, you can improve your score before applying if it's low. Generally, a Credit Score lies between 300-900.
- Credit Enquiries: When you apply for a loan or credit card, the bank provides a "hard inquiry"—a request to the credit bureau for your credit report. Making several hard inquiries in a short period may result in a decrease in your credit score. When you apply for a credit card, you should make an effort to avoid making repeated hard inquiries and consider your possibilities. It is advised that you wait at least six months before reapplying for a credit card or loan.
Conclusion
When used carefully, credit cards may be an effective tool to handle expenditures. They provide strong shopping experiences, medical support, and financial freedom. Anyone can apply for a credit card if they complete the requirements and provide the required paperwork; just be careful of your credit score.