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Credit Card : Work, Types, Eligibility, Documents Required & Advantages

Last Updated : 14 Mar, 2024
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What is Credit Card?

Credit card is a payment card issued to certain individuals based on their income, credit score and existing debts by a financial institute like Banks and NBFCs, it has a pre-set credit limit for doing transactions. Every time you spend from a credit card, you get the bill and you have to repay the bill within a limited period. After a limited period, you must give the balance an additional interest amount.

Credit card displays important details like Cardholder name, Credit card number, Expiry date, CVV, or a Rupay card, Master card, or Visa card. The use of Credit Cards offers multiple benefits like cashback rewards, Discounts, and no interest charges on credit balances. Remember, it’s crucial to pay your credit card bill on time to avoid interest charges.

How do Credit Card Work?

Credit Card is a loan provided by the credit card issuer to individuals that they use for everyday purchases like Pay bills, Shopping online, or in stores purchases.

When you use your credit card to pay for your purchases in any store or online, the details are sent to the shopkeeper’s bank. This bank then checks with the credit card network for approval. Finally, your bank that issued the credit checks your information and authorizes or declines the transaction. If the transaction is approved, then the store receives the money and the amount spent on purchase is deducted from your credit limit. At month-end, you’ll receive a card statement showing your transactions, previous balance, new balance (current amount owed), minimum amount due, and the payment due date.

Credit card offers an Interest-free period that is up to 50 days to repay your due amount without interest. This includes:

  • Billing cycle: 30 days to receive your bill.
  • Grace period: Around 20 days after the billing cycle to make the payment without interest.

Interest-free period not applicable in case of cash withdrawals or if you have any previous unpaid balance.

Always remember to pay back the credit card amount by the due date. If you are unable to pay the credit amount on time you can also choose to convert the amount into monthly installments (EMIs) to spread the repayment. If you Fail to repay by the payment due date or minimum amount will result in interest charges and penalties.

Example of credit card, Suppose you have purchased a smartphone for ₹10,000 on your credit card. The purchase is approved, and your credit limit reduces by Rs. 10,000. As long as you pay back the entire ₹10,000 within the interest-free period (usually around 50 days), you won’t incur any extra charges. However, if you only pay the minimum amount due let’s say ₹1000 and carry the remaining outstanding amount ₹9000, then interest will be charged on the outstanding amount from the next billing cycle.

The best part of the credit card is that money is not deducted from the bank account it is deducted from the credit card limit. Additionally, you will find different types of credit cards offered by different institutions, you must wisely choose which credit card suits your spending habits.

Types of Credit Card

There are several types of credit cards issued by financial institutions. Here is the list of the most common types of Credit Cards.

Types of Credit Card


Rewards Credit Cards

The use of these credit cards on every time you spend your credit limit you get rewards points that you can use to avail various voucher and discount coupons offered by credit card issuer.

Cashback Credit Cards

Every time you spend your credit limit you get certain amount or percentage of that spend amount in the form of cashback rather than reward points.

Shopping Credit Cards

These credit card offer more discounts, cashback, and reward points that are aims toward shopping online or offline.

Travel Credit Cards

These credit card aims to provides its user with discounts, cashback, and reward points toward air, railways, and sea travel with additional benefits like travel insurance and lounge access.

Co-branded Credit Cards

These credit card offer with the partnership between a credit card issuer and other company like IRCTC SBI Platinum Card and Air India SBI Platinum. These card cater to brand loyal customers who frequently shop with the partner brand.

Fuel Credit Cards

These credit card aims to provides more discount and reward point on fuel spending.

Lifetime Free Credit Cards

These credit card offer a great benefit of not having any annual fees or joining charge.

Secured Credit Cards

These credit card are back by certain security amount paid by individuals to get a credit card. Many banks issue their credit card against FD.

Lifestyle Credit Cards

These credit for those individual that are constantly spending their on booking movie tickets, dinning, hotel booking and shopping online or in-store.

Premium Credit Cards

These credit card focused toward HNI and with exclusive benefits. These cards offers access to certain clubs and places that are not easily accessible.

Business Credit Cards

These credit card aims to business owners or professional that usually spend large amount of money.

Credit Card Eligibility

Eligibility criteria set by the financial institution to apply for credit card in India.




Minimum 18 years, Maximum 60 years



Employment status

Salaried or Self Employed


Depend on issuer credit card policy

Credit Score

700 and above

Documents Required to Apply for Credit Card

Here are the key documents requirement before applying for credit card.



Age Proof

Birth Certificate, Aadhaar card, Passport

Passport Size Photographs


You are required to have latest passport size photographs and


Financial Institution are now doing e-KYC that take live photographs to complete this process

Identity Proof

Aadhaar card, PAN card, Passport, Voter ID card, and Driving License

Address Proof

Aadhaar card, Voter ID card, Electricity Bill, Telephone Bill, Ration Card, and Bank Statement

Income Proof


Last 3 Months Salary Slip with 6 month salary account bank statement.

Form 16 issued by employer that act as your income proof.

Self Employed:

Business Proof Like registration, licenses or GST.

Recent ITR Filing with Computation of Income.

Reasons to Apply for a Credit Card

There several reasons for you to apply for Credit Card.

  • It offer a key benefit of Buy Now and Pay Later up to certain period of time (up to 50 days) that help many individual in maintaining strong financial position with a good saving account balance that will help them in case of any emergencies where they need extra cash.
  • Credit card EMI feature helps in purchase of expensive product or services like TV, Smartphone, Trip to Dubai that you can pay back in monthly EMIs installments without the need to save large amount of money to buy later.
  • You can use credit card can make purchases in both domestic and international transaction. This gives its user a good advantage against debit card, where many website and international transaction don’t accept debit card.
  • Credit cards offers various cashback, rewards, discounts, and more that you can avail while spending your credit limit. Common examples of these offer you see on amazon, Flipkart, and AJIO that specific products have cashback offers that can be availed by the use of mention credit card.
  • Credit card helps in build a good credit score that will be beneficial to you in future when applying for new credit card or loans with better interest rates and higher credit limit. Remember to pay your dues on time to avoid any effect on credit score.
  • Credit card helps in keep track of your spending that you can check to see where you are spending more money and then you can manage you finance better and avoid any unnecessary purchase in future.
  • Credit cards are equipped with many security feature like fraud protection to help its user to avoid any theft or fraudulent activity.

Learn more about How to Manage Multiple Credit Cards?

List of Banks that Offer Best Credit Card in India

SBI Credit Card

ICICI Credit Card

RBL bank Credit Card

Kotak Credit Card

HDFC Credit Card

Axis Credit Card

American Express Credit Card

IDFC FIRST Credit Card

Learn more about Top 10 Best Credit Cards in India 2024

Advantages of Credit Card

  • Immediate Use: As stated above, if you want to purchase now and want to pay later, you can easily do so with the help of a credit card.
  • Cashless Transaction: No worry about carrying cash, you can just go to the store with card payments, and enjoy. With the advancement of digitalization, the use of cards increased.
  • More Secure: In the case of a debit card money is deducted from your savings account but in the case of credit cards, the bank pays on your behalf of you, and your money is saved.
  • More Discounts: With the popularity of Credit Card. Some online shopping websites offer more discounts on credit cards than others. There are different types of credit cards that offer more discounts than a normal credit card.
  • Wide Acceptance: With the expansion of the internet, everywhere credit card is accepted even in local grocery shop also. Credit cards are also acceptable in foreign countries giving more credit points to the user
  • Emergencies: One of the most important benefits of credit cards. In an emergency, if money is not available in a savings account. One can pay with a credit card to meet the requirement.
  • Purchase Protection: Some additional protection is offered by credit cards in case of loss or damage. For this, you have to give a detailed description to the credit card company, and generally, they cover expenses under Rs 50000.
  • Making Travel Easy: There is a wide range of benefits for Credit card holders such as, it gives a beautiful experience through lounge access at the airports or railway stations.

Disadvantages of Credit Card

  • Overspending: Credit Card limits can exceed to a huge extent. According to data, People start making unnecessary expenses. These unnecessary expenses increase the debt of the person and can have a mental headache.
  • Fraudulence: Thieves can take your card information and can make improper use of it. It becomes the responsibility to inform the bank. The more you delay in informing the more the chance that you will lose money.
  • High-Interest Charge: If someone fails to repay a credit card amount within the period high-interest rate is charged to them. This penalty percentage varies from 30% to 40% which is a good source of income for the banks.
  • Cash Withdrawal: Credit Card charge a high fee on withdrawal of the money from the card. Different types of fees will be charged, such as cash advancement fees, ATM fees, etc. Use a debit card for cash withdrawal.
  • Minimum Due: A lot of credit card holders, instead of paying the full bill, pay the minimum due. Due to this, they pay more interest. Interest is added to the remaining amount of the bill and you will fall under the debt trap.
  • Hidden Cost: Credit Card has several taxes and fees. Penalty for late payment, and if you want duplicate statement you will be charged fee, one must also check their Credit Bills as EMI paying the bill, which degrades the credit score.

Credit Card vs Debit Card

Basis of Comparison

Credit Card

Debit Card


Different types of fees are applicable

Generally, only an annual fee charged


up to 50 days of interest-free

No interest charge



Not every time chargeable


Has a particular credit limit

Has a particular credit limit (Mostly on 24 hours basis)


Comes with more discounts, cashback

Comes with less discount, cashbacks

Money Source

Money Borrowed from the credit-issuing company

More deducted from your savings account.

Lastly, the best option will be to be in a safe situation by avoiding unnecessary expenses, where you are unable to repay your credit card bill. Ensure that you only spend on what you can only afford. If you know how to manage your expenses on a credit card, then you must go for it making your debit card usage limited.

Credit Card Frequently Asked Questions -FAQs

How to Apply for Lost Credit Card?

Before applying for new or replacement credit card, contact your bank’s customer care Or use banking app to block your credit card. Then contact your credit card bank or NBFC to apply for new credit card or you can also apply for a replacement credit card directly through their mobile banking app. Read this article for more detail on How to apply for lost credit card?

How to Use Credit Card for Shopping?

You need to choose the right credit card for you based on your perference and choose which type of credit card you need like Shooping credit card, Reward credit card, and Cashback credit card. Choose the credit that give maximium benefits specific to you like some may give you more discount but in other than shopping like travel or dinning their discount is not very good than their competitor. so you need to watch for these card, Read this article for more detail on how to use credit card for shopping?

How to Get a Credit Card Without a Job?

There are few option available for individual that need Credit Card Without a Job like they can apply for secured credit cards or add Co-signer to make credit card. Read this article for more detail on how to get a credit card without a job?

How to Track Credit Card Application Status?

There are Two methods to track credit card application status:

1. Online Tracking: Visit credit card issuer website to check the status of your application

2. Offline Tracking: Customer care or Bank visit

Read this article for more detail on how to track credit card application status?

How to Generate or Change Your Credit Card PIN?

Credit Card PIN can be change or genrate using netbanking, ATM or visting bank branch. Read this article for more detail how to generate or change your credit card pin?

How Many Credit Cards one Should Have?

There is not a certain number on how many credit cards should you have but it depend on your financial and spending habits. Read this article for more detail on how many credit cards should i have?

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