What is a Credit Card?

What is Credit Card?

A credit card is a financial tool that allows cardholders to borrow funds from a financial institution, typically a bank, up to a predetermined credit limit. Unlike debit cards, which are linked directly to a bank account and draw on the available balance, credit cards enable users to make purchases or withdraw cash on credit.

Every credit card comes with a pre-decided credit limit up to which you can spend. You have to repay the amount spent in a billing period – usually a month – on the due date. You can also pay a minimum portion of the bill and roll over the remainder as credit, for which the bank will charge you interest.

Credit cards can be used for making both offline and online transactions. They also give you benefits like reward points, cash-back offers and many more.

With a credit card, you can make purchases even if your bank balance is zero. Of course, you have to pay it back by the due date to avoid a penalty.

How Credit Card Works? Explained in 5 Simple Steps

• Swipe, Tap, or Insert Use your credit card at a physical store or enter the card details for online purchases.

• Authorization The merchant sends a request to your bank to check if the card is valid and has enough credit.

• Approval Your bank approves the transaction if all conditions are met (limit, validity, fraud check).

• Payment to Merchant The bank pays the merchant on your behalf, and the transaction is completed instantly.

• Statement & Repayment You receive a monthly credit card bill. Repay the total due by the due date to avoid interest.

Types of Credit Cards

• Basic Credit Cards Description: The most common type, with lower credit limits and fewer features. Benefits: Easy to qualify for, good for building a credit history.

• Secured Credit Cards Description: Requires a security deposit, good for building credit history. Benefits: Easier to get than unsecured cards, and helps build credit.

• Rewards Credit Cards Description: Earn points or cashback on purchases. Benefits: Redeem points for travel, merchandise, or statement credits.

• Cashback Credit Cards Description: Get a percentage of your spending back as cash. Benefits: Simple to understand benefits, good for everyday purchases.

• Travel Credit Cards Description: Earn rewards specifically for travel expenses. Benefits: Airport lounge access, travel insurance, reward miles for flights and hotels.

• Premium Credit Cards Description: High credit limits, exclusive benefits and concierge services. Benefits: Airport lounge access, travel insurance, premium rewards, golf memberships, etc.

• Co-branded Credit Cards Description: Issued in partnership with a specific airline, retailer, or loyalty program. Benefits: Earn bonus rewards for spending with the partnered brand.

• Business Credit Cards Description: Designed for business expenses, often with a separate credit line. Benefits: Cashback on business purchases, rewards for office supplies, travel, and more.

Credit Card Interest Rates in India

• Regular Cards Interest Rate Range (p.a.): 29.88% – 43.20% APR Range (p.a.): 33.88% – 49.20%

• Travel Cards Interest Rate Range (p.a.): 32.88% – 42.20% APR Range (p.a.): 36.88% – 48.20%

• Premium Cards Interest Rate Range (p.a.): 23.88% – 38.20% APR Range (p.a.): 27.88% – 44.20%

• Cashback Cards Interest Rate Range (p.a.): 34.80% – 44.00% APR Range (p.a.): 38.80% – 50.00%

• EMI Cards Interest Rate Range (p.a.): 12.50% – 36.00% APR Range (p.a.): 16.50% – 40.00%

Credit Card Eligibility Criteria

• Age General Range: 18+ Specifics: Minimum age (often 21–25 for premium cards); Maximum age (often 65–70)

• Nationality/Residency General Range: Indian Citizen/Resident Specifics: Some cards available to NRIs or foreign nationals

• Employment Status General Range: Salaried / Self-Employed Specifics: Minimum income requirements; Proof of income (salary slips, ITR for self-employed)

• Minimum Income General Range: ₹15,000 – ₹25,000 per month Specifics: Higher income needed for premium cards; varies based on card type and city

• Credit Score General Range: 650+ Specifics: Minimum score varies by issuer and card type; higher score = better card options

• Existing Credit History General Range: Positive credit history preferred Specifics: No defaults, delinquencies, or high outstanding debt

• Other Factors General Range: CIBIL Report, Payment History, Debt-to-Income Ratio Specifics: Issuers may consider additional factors for risk assessment

Documents Required for Credit Card Application

• Identity Proof General Range: Government-issued photo ID Specifics: Aadhaar Card, PAN Card, Voter ID, Passport, or Driving License

• Address Proof General Range: Residential address verification Specifics: Utility bill, Aadhaar Card, Passport, Voter ID, Rent agreement

• Income Proof General Range: Verifies your earning capacity Specifics: - Salaried: Latest salary slips (last 3 months), bank statement, Form 16 - Self-Employed: Latest ITR, business registration certificate, audited financials

• PAN Card General Range: Mandatory for all applicants Specifics: Required for identity verification and linking with credit history

• Photograph General Range: Passport-size photo (if offline application) Specifics: Usually 1–2 recent photographs may be asked in physical application

• Credit Score Report (Optional) General Range: Sometimes checked internally by issuer Specifics: Applicants with strong credit history may be asked fewer documents

• Additional Documents (If Applicable) General Range: For special card types or offers Specifics: Co-applicant documents, company ID, or other verification if applying under corporate or co-branded card offers

Credit Card Fees and Charges

• Annual Fee Description: Yearly charge for card membership. Typical Range: ₹0 – ₹5,000+

• Renewal Fee Description: Charged after the first year; often waived if spending criteria are met. Typical Range: ₹0 – ₹2,000+

• Cash Advance Fee Description: Charge for withdrawing cash from an ATM or bank using your credit card. Typical Range: 2.5% – 5% of transaction amount (minimum ₹100 – ₹500)

• Foreign Transaction Fee Description: Charge for using your credit card outside India (or in foreign currency online). Typical Range: 1% – 3% of transaction amount

• Late Payment Fee Description: Penalty for missing the payment due date. Typical Range: ₹100 – ₹500 per instance

• Over-limit Fee Description: Fee for exceeding your credit limit. Typical Range: ₹250 – ₹500 per instance

• Minimum Payment Charge Description: Fee for paying less than the minimum required on your monthly bill. Typical Range: 5% of outstanding balance (minimum ₹100)

• Returned Payment Charge Description: Fee when your card payment fails (e.g., bounced cheque or rejected UPI). Typical Range: ₹250 – ₹500 per instance

• Card Replacement Fee Description: Fee for issuing a new card in case of loss or damage. Typical Range: ₹100 – ₹500

• Other Charges Description: Includes charges for add-on cardholders, duplicate statements, SMS alerts, etc. Typical Range: Varies by bank or issuer and service used

Building a Healthy Credit Score

• Pay Your Bills on Time: Consistent on-time payments are the most significant factor influencing your credit score. Set up auto-pay or calendar reminders to avoid missed payments.

• Maintain a Low Credit Utilization Ratio: This ratio indicates how much of your credit limit you’re using. Ideally, keep it below 30% for a good score.

• Don’t Apply for Too Many Cards at Once: Every application triggers a hard inquiry on your credit report, which can temporarily lower your score. Apply strategically.

Smart Spending Habits

• Budget and Track Expenses: Create and track your spending to avoid overspending. Many credit card apps offer budgeting tools.

• Prioritize Needs Over Wants: Use your credit card for planned purchases you can afford to repay. Avoid impulse buys or exceeding your budget.

• Pay More Than the Minimum: The minimum payment only covers a small portion of your balance. Pay more to bring down the principal amount and reduce interest charges.

How to Apply for Credit Cards at Fincover?

• Log onto Fincover.com Visit the official website using any device with internet access.

• Select “Credit Cards” and Click Apply Now Navigate to the Credit Card section from the homepage and begin your application process.

• Enter the Required Information Fill in basic details like income, location, and employment to check eligibility.

• View Credit Card Options from Multiple Banks After submitting your details, you’ll see a list of eligible credit card offers from various banks.

• Compare and Choose the Best Card Analyse benefits, fees, and features, and select the card that fits your needs.

• Submit the Necessary Documents Upload ID, address, and income proof. Your application will be forwarded to the bank. A representative will contact you for any additional verification.