Skip to content Skip to sidebar Skip to footer

Credit Cards and its Importance

Plastic Money – Credit Card and its utility

Credit Card

Using plastic money instead of hard cash is a good step and credit card is another way to use Plastic money after Debit Cards. A credit card is issued by the financial institution with the pre-approved limit that means customers can borrow money from the institution and a maximum ceiling of borrowing is the pre-approved limit. This limit is based on the customer’s credit score and transaction history. The difference between Debit Card and credit card is that while you swipe debit card money deducted from your savings account but if you swipe credit card that money gets deducted from the pre-approved limit.

In case of credit card, you get Grace period which may vary from 20-45 days after which you have to pay your bill without paying anything extra but if you fail to do so in grace period then you will be charged with interest in addition to money.

👉👉Types of Credit Cards:

There are various types of cards issued by the service providers available in the market. An individual can choose among them depending on their specific requirements and facilities provided for the cardholder by issuing authority:

Standard Credit cards

These are the simplest one with no extra rewards or advantages so one which want nothing else but only credit limit can go for this. It is easy to understand and as you pay the bills in time will generate you more limit that’s all.

Balance transfer credit

These cards are those which have a facility to transfer the balance from high-interest rate balance and to save money. But these types of cards usually come with a condition that a minimum of two transactions a month is necessary.   

Reward credit cards

These areas the name suggests have reward points associated with the use of the card and on the base of reward, cards can be of reward point type, travel tye, or cashback type.

Charge credit cards

These cards usually don’t have a pre-approved limit as other cards have but here you have to pay the full amount of bill at the end of the month and good credit history must be there to avail the facility of this card.

Secured Credit Cards

These cards are for those people who have a very low credit score or damage their credit history so those people must have some security against which card will be issued. Generally, security is in the form of Fixed Deposit in the bank. The limit for the card will be equal to or less than the deposit made against that card.

Limited purpose credit cards

are designed to be used for specified purposes only like fashion stores, oil credit cards, and cardholders will get incentivized for using the card at specified outlets or for products.

Business credit cards

are meant for businessmen to keep their business and personal transactions different.

Credit Card and its Importance

Charges / Fees on Credit Cards

The card comes with three types of fees on consumer those are Transaction fees, Interest Fes, and Annual Fees.

Transaction Fees are those which are charged by the merchant or company on every transaction. These fees can be volatile depending on the product, outlet of product, the purchasing capacity of the holder, and also on the type of credit card you are using.

Interest fees are charged by the company from the consumer when you do not pay your bills on time. Credit Card companies state the rate at which interest will be levied to a customer in their policy or documents but in actual the interest charged will be more than that. So, it is advised to pay your dues or bill well before time otherwise card will be a burden on your pocket.


Annual fees are charged by the provider from the cardholder for maintenance of card or for providing the services in a year. Normally companies deduct annual charges in advance and you should be aware of the annual fees and all before taking the card. Many providers offer credit cards with no annual fees also, you can go for them as well provided you have limited usage and are not fond of extra facilities and reward points.

Other than these there are some minor charges which must be known for you to utilise the credit card well.

Charges for issuing Duplicate statement, fees for late payment, cash withdrawal charges, fees for using card for over the limit, GST and transaction abroad fees.

👉👉Things to keep in mind while using credit card

a) Use the Grace period effectively

b) Choose the right card depending on your need

c) Use credit cards online to make rewards points

d) Redeem rewards points timely before they get expired.

e) If completed one large transaction then convert it into EMI. But only one can be converted to EMI in a month.

f) if possible, pay the total amount dues and don’t go for paying the minimum amount due as it will levy heavy interest on you. The reason why I don’t prefer to minimum amount is explained at the end and please go through it carefully.

g) Use a credit card only when you are certain to pay dues in time else it will lend you in trouble and disturb all your financial health.

h) A credit card is best for one who is earning on the fixed interval or salaried one.

i) Remember to get your card back after each transaction.

j) Never sign an incomplete charge slip

k) Keep your card safe and always in case of suspicious activity with card immediately report to helpline no and block your card.

l) Please don’t disclose any of your card or account details to anyone.

m) Keep your Mobile no/Email updated for each transaction alerts

👴👴 7 Advantages of Credit card

a) It is safe to have a card than to carry cash in hand.

b) Using a credit card makes credit rating of individual.

c) Use of Grace period or interest-free days.

d) Reward points on online purchases using credit cards.

e) It can be used for any currency overseas as well.

f) In an emergency can be used as a debit card to have cash in hand provided u have to pay heavy interest.

g) Purchase in bulk amount and can pay in easy EMI.

👲👲 5 Disadvantage of Credit Card

a) The high rate of interest.

b) Credit card is prone to online frauds.

c) Taking cash out of an ATM using a Credit card is very expensive.

d) Annual Fees and other hidden charges.

e) Sometimes you can be charged with extra surcharges for usage above purchase limits, using the card abroad, fees for reward programme etc.

👉👉Different ways to pay your credit card bills

Bill of Credit card can be paid in many ways out of the following:

⇋⇂Pay online using net banking

⇋ Using mobile banking application

⇋ Pay usinG UPI methods

⇋ Use NEFT

⇋ Auto Debit from Account

⇋ Use ATM to pay bills

⇋ Over the counter payment

⇋ Electronic Drop Box

👴👴CIBIL (Credit Information Bureau of India LTD)

It is a repository of information that contains the credit history of all borrowers. It specifies the credit score in respect of each individual by looking at many factors such as loan repaying capacity, transactions, etc. The consumer must have a good credit score before applying for a credit card and also, applying for a credit card also lowers the credit score.

👉👉 5 ways to improve Credit score:

⇋ Make at least a minimum amount due each month ( which I don’t prefer usually ).

⇋ On-time payment has the most positive impact on the credit record.

⇋ Maintain a reasonable level of credit.

⇋ Use a limited number of credit cards as having a large number of cards hurt your credit history

⇋ Use credit cards judiciously and must not touch your credit limit.

Why not pay the Minimum amount and pay Full Outstanding

⇨ The minimum amount is 2% of the outstanding balance and if suppose outstanding balance on your credit card is 5000 Rs than the minimum amount is 100.

⇨ Now if you want to pay a minimum than these 100 rupees will not be deducted from your outstanding balance as a whole.

⇨ A finance charge will be made by the company to the consumer which is @1.5% of the outstanding balance ( 1.5% of 5000 = 75 Rs. )

⇨ This Finance Charge amount will be first deducted from Minimum amount due. So here first this 75 will be deducted from the minimum amount due to i.e 100.

⇨ Now the remaining 100-75 = 25 Rs will be reduced from the outstanding balance.

⇨ So the outstanding balance for the next month will be 5000-25 = 4975 Rs.

⇨ So now you can see, how this cycle will continue for years if you are opting to pay minimum amount each time and you will end up paying heavy money in terms of charges to the company.

⇨ That why it is my request to you that if possible please pay the full outstanding amount as soon as possible.

Leave a Comment