Credit Card
Features and benefits of credit cards
Credit Limit: This represents the maximum amount you can utilize on your credit card at any given moment. Going beyond this limit may incur fees, and the credit limit can vary monthly based on your purchasing and payment patterns.
Balance: Your credit card balance encompasses the total amount owed, covering purchases, finance charges, and fees. Monitoring your balance is convenient through online platforms or customer service inquiries.
APR (Annual Percentage Rate): APR is the Annual Percentage Rate, denoting the interest applied to the balance carried beyond the grace period.
Grace Period: This is the duration during which you can fully repay your balance without facing additional charges. Notably, grace periods may be absent for transactions like balance transfers and cash advances.
Credit Card Fees: Common fees include annual fees, finance charges, late fees, and over-the-limit fees. Adhering to timely credit card repayments can help you avoid certain fees, making it crucial to understand the terms associated with your card usage.
Credit card eligibility
Age: Applicants are usually required to be a certain age, typically 18 or older, with some issuers setting a higher age requirement.
Income: There is often a minimum income requirement to ensure that individuals have the financial means to responsibly repay credit card debt.
Credit Score: A favourable credit score is crucial for eligibility. A higher credit score reflects a history of responsible credit behaviour, increasing the likelihood of approval with favourable terms.
Residential Status: Depending on the issuer, proof of current address or residency may be necessary.
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It's essential to understand that meeting these criteria doesn't guarantee approval, as the final decision rests with the issuer based on their assessment of the application and creditworthiness. Different credit cards may have varying eligibility criteria and features, so a thorough review of the terms and conditions before applying is advisable.
Documents required to apply for a Credit Card
Identity Proof: Documents like an Aadhaar Card, PAN card, Driver's License, Passport, or Voter's ID to verify identity.
Annual ITR (Self-Employed): For self-employed individuals or those with alternative income sources, providing annual Income Tax Returns (ITR) may be necessary to demonstrate financial status.
Address Proof: Submission of documents such as an Electricity bill, Telephone bill, Aadhaar Card, or other valid proof of residential address.​
Latest Salary Slips: Salaried individuals may need to submit recent salary slips to showcase income and repayment capacity.
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How does a credit card work?
When making online purchases, the e-commerce platform typically requests the following details:
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Select Card Type (Visa or Mastercard)
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Enter the 16-digit card number
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Provide Expiry Date
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Input CVV
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Specify Name as Printed on the Card
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Optionally, enter the Billing Address
Upon clicking "pay," this information is transmitted to the bank through a payment gateway. The bank then sends a one-time password (OTP) to the registered email or mobile number for transaction authentication. If the OTP is accurate, the transaction is successfully completed. This process encapsulates how credit cards function and the steps involved in credit card payments.
Interest: Understanding how credit cards work involves recognizing the crucial role of interest. When you use a credit card, you're essentially borrowing money from the issuer. Similar to a loan, interest is applied if you don't pay the entire bill. It's important to note that the interest is calculated monthly, not annually. For instance, the monthly interest rate might be 3 percent, which equates to approximately 36 percent annually.
Credit Limit: Each credit card comes with a predefined credit limit, representing the maximum amount you can spend. Attempting transactions beyond this limit may result in rejection by the credit card issuer. Factors influencing the credit limit include the card type, your income, existing debts, credit score, and payment history. Responsible usage and prompt payments may lead to a credit limit increase.
Billing Cycle: The billing cycle is a set period during which you can make purchases before receiving the bill. Making purchases earlier in the cycle provides a longer credit period, allowing more time before payment is due.
Minimum Payment: Credit card bills require a minimum payment, and failure to meet this requirement may result in charges. While you can carry forward amounts exceeding the minimum, interest is levied on the remaining balance.
Balance: The balance on your credit card reflects the total amount spent that hasn't been repaid. Managing this balance is crucial for financial responsibility.
Terms and conditions: Aapka Loan holds exclusive discretion in approving credit card applications. The information presented in this article is of a general nature and serves informational purposes only. It does not replace tailored advice based on individual circumstances.