In 2019, the number of credit card users in India had reached around 49 million, and it is expected to grow at a CAGR of 25% during 2020-2025. The credit card market in India has grown significantly in recent times.
How credit cards make a difference?
A credit card is a payment card that allows individuals to manage any financial need they have without worrying about the cash in hand. However, there is a limit to every credit card, which is expandable. Financial institutions allow their customers to borrow within that credit limit and then repay it later.
In a nutshell, credit card spending acts as a loan. Instead of giving the full amount in cash, credit card issuers allow individuals to borrow any amount they want within their credit limit.
How do credit cards work?
As mentioned earlier, with the credit card meaning, it gives users certain freedom in terms of their spending. However, there is a series of activities that goes behind the scenes of a single transaction.
- When a user swipes his/her card in a POS terminal, it sends a message to the issuer asking about the authenticity of this card and its available credit limit.
- The credit card issuer then authenticates the validity of this card. After that, they confirm or decline the payment.
Additionally, users should know that with every transaction, their available credit limit reduces by the same amount. For instance, if anyone has an Rs.50,000 credit limit, and spends Rs.10,000 purchasing a mobile phone, his/her credit limit will go down by the exact value of the previous transaction.
How to repay a credit card debt?
Since credit card meaning is a loan, users must know that a specific interest rate is charged on the due amount. However, if they pay their entire debt within the repayment period, they are not liable for any additional interest.
Moreover, credit card issuers use a term called the billing cycle. It means a 30 day period where any transactions made under a specific card will be recorded and billed accordingly. During this period, no interest is applied to the due amount. Furthermore, credit card companies allow an interest-free grace period of 15-20 days to pay the outstanding.
In case any individual fails to clear the bill within this period, he/she will have to pay interest on the outstanding amount and penalty charges, if applicable. However, these charges are not uniform; they vary from one financial institution to another.
Benefits of credit cards
- One of the primary benefits of a credit card is its reward point facility. With every transaction, individuals score some reward points, which they can later use for different purposes. Moreover, if they have any specialized cards like shopping credit cards, they will receive accelerated reward points on purchasing from particular retailers.
- They are very useful to manage any unforeseen financial requirements. Additionally, the ATM withdrawal facility can help individuals in case they have any urgent need for cash.
- Last but not least, using a credit card wisely can assists individuals to build a credible credit history and improve their existing credit score.
A better credit score can help individuals to apply for a feature-loaded credit card like Bajaj Finserv RBL Bank SuperCard. It has industry-first features like 50 days of interest-free ATM withdrawal facility and emergency personal loan without any interest for up to 90 days.
The credit card has several customer-friendly benefits that make them an ideal spending tool. Such benefits have surged their popularity in recent times, and it is indicating a shift towards more cashless expenditures. Individuals should read all the terms and conditions before applying for a credit card online.