What are Credit Cards: Features, Advantages & Eligibility Conditions?

Do you need extra funds in an emergency, buy expensive items, incur travel or medical expenses, or purchase electronic gadgets? If yes, financial institutions offer to borrow money using credit cards. Now, you can easily walk into the store, buy your favorite gadget, swap the credit card, and walk out. Credit cards have made the entire process of paying bills hassle-free and convenient. This article will give you insight into the credit card components, key benefits, and eligibility criteria.

What is a Credit Card?

It is a financial element that enables you to borrow money to meet your expenses and gives you the freedom to repay later. You can make the required payments and pay back the amount on the due date to the bank. In this way, you are not needed to wait for the salary to pay bills and purchase expensive items. With all these benefits, you can get your bank's best credit card for daily use.

How Does a Credit Card Work?

The credit card provides the benefit of paying bills and buying items without cash. The credit card contains the following elements on the front: expiry date, card number, cardholder name, and logo of MasterCard or Visa. The back side contains a magnetic strip and CVV number. Let me tell you how credit cards function.

You have purchased an item from the store and given a credit card at the cash counter. The card is swiped and asks for the PIN to authenticate the transaction.
If you are a beginner, you must know the best way to use a credit card: The machine reads the magnetic strip and sends details with a PIN to the bank. If everything looks fine, then the bank approves your purchase.
On approving the transaction, the machine prints receipts.

The working of Credit Cards Online:

If you are paying bills or purchasing online, the e-commerce store asks you the information such as a 16-digit number, whether it is MasterCard or Visa, expiry date, CVV, name, and billing address if required. These details are sent to the bank through the payment gateway. The bank sends OTP to the registered mobile number and email id for authentication.

Types of Credit Cards

Different types of credit cards make your shopping easy. Let's discuss them in detail:

Fuel credit card- You can save fuel costs, manage transportation expenses with this card, and get a waiver on the surcharge.
Travel credit card- You can get attractive discounts on airline, rail & bus tickets, and cab bookings and earn reward points & redeem them on future bookings. Also, you can access the entry to VIP airport lounges and book travel tickets for less.
Shopping credit card- You can shop offline and online store partners on every purchase and get discount vouchers and cashback.
Secured credit card- You can improve your credit score by using a credit card correctly. The card is issued against a fixed deposit and offers an attractive interest rate.

What are the benefits of Credit Cards?

Now, you must understand credit card advantages. You can use it on clothing, grocery, booking movie tickets, purchasing home appliances, and paying utility bills.

Purchase on credit- The credit card offers a credit limit that allows you to pay later. Also, you can convert the amount into EMIs and can repay the amount in a certain time.
Accepted payment method- It can be used to buy anything and travel anywhere without carrying cash.
Reward points- The card provides rewards that can be used per your use.
Interest-free cash withdrawals- You can also withdraw money at the time of need, and the bank allows interest-free withdrawals that can be repaid in a definite period.
Insurance coverage- You will also get comprehensive travel and accident coverage.
Convenient travel- You get complimentary lounge access at railway stations and airports. You can also enjoy discounts in various restaurants.
Improved credit score- Apart from the credit card benefits, you can also use it to improve your credit score properly. If you repay within a defined time frame, you can improve the CIBIL score. It helps you to get loans in an emergency.
Cashback- You get discounts and cashback offers on dining and entertainment outlets. Even you get the added benefit of a fuel surcharge waiver.
Monitor your transactions- You can track your payment after reviewing the statements received at the end of every month.

How is a Credit Card Different from a Debit Card?

Let's see a debit and credit card comparison.

Credit cards are borrowed funds given by the bank, while money gets deducted from your bank account in the case of a debit card.
A credit card can provide reward points, cashback offers, and discounts, while debit cards prevent you from debt.
Credit card supports building credit, and fees & interest rate varies bank to bank while using a debit card consists of no fees or interest.

Components of a Credit Card

The credit card helps you spend money, and you are not required to wait for another month's salary. Various credit card components are mentioned below:

Front side of a Credit Card:

Expiry date
Credit card number
Name of holder
Logo of MasterCard or Visa

Backside of a Credit Card:

CVV number
Magnetic strip

What are the features of a Credit Card?

The best credit cards for beginners has numerous credit card features; these are listed below:

Credit limit- Every credit card has a limit beyond which you can't spend money. The bank will disapprove your transaction request if you have reached the limit. The credit limit is based on income, kind of credit card, debts, and repayment ability. In case of a good credit score, the card issuer can enhance your limit.
Minimum payment- The minimum payment is required to pay every month to avoid the charge. If you do not pay it, you must pay interest on the entire amount.
Billing cycle- It is a fixed period to make the purchases till you receive the bill.
Balance- It is the amount that is spent on a credit card and has not been repaid it

How to Choose the Best Credit Card?

You can select the best credit card for daily use by following the below-mentioned steps:

Credit score- You can check your credit score as it. A better score increases the chances of card approval. Identify the underlying cause and improve your spending pattern if the score is less.
Recognize your need- There are three kinds of credit cards. The card helps to improve credit, earn rewards and save money on interest.
Get an answer to your queries- First, you have to identify the purpose of a credit card: whether it is for traveling, students, medical expenses, shoppers, extra savings and additional discounts, or any other use.
Get a high-value credit card- Select the credit card that offers cashback offers, reward points, and discounts.

Conclusion

So, you have understood credit card features, components, and advantages. You must pay the bill on time to maintain a good credit score. You can avoid interest rates by paying the bill on time every month. These tips are a must to follow for the safe use of credit cards for a long period.

FAQS on Credit Card

What is a Credit limit?

It is the maximum money that a financial institution allows you to spend on a credit card. This credit limit is based on your credit score, repayment ability, and income. The best way to use a credit card is to pay on time.

How can I get a higher Credit Limit?

You will receive a high credit limit if your CIBIL score is high. The credit score will be good if you pay the amount on time and make the best use of offers and rewards.

Should I choose Cashback Credit Card or a Rewards Credit Card?

There are different types of credit cards, like cashback and rewards credit cards. If you are a travel freak, opt for a reward credit card, as you will get frequent cash back or rewards. Go for the cashback credit card if you are looking for low annual fees.

How to earn rewards on a Credit Card?

You can earn points by making specific purchases on your card and signing up for the bonuses. So, these are some of the advantages of credit cards.

What is the Purpose of a Credit Card?

It enables you to purchase expensive services or products on EMIs. There is no need to wait for the next month's salary, but you can get the credit that can be repaid in the stipulated time. The best way to use a credit card for the long term is to pay the credit amount on time.

What is a Credit Card Annual Fee?

The credit card annual fee is the amount that needs to be paid for a year for using the credit card.

How long are credit cards usually valid?

Credit cards are usually valid for 3-5 years. You must check with the bank for the expiration date.

What are Credit Scores and Credit History?

Credit score and history are important features of a credit card. The credit score signifies creditworthiness, while credit history defines repayment history, debt amounts, and the number of open accounts.