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Ultimate Guide: How Credit Card Works in India

An Ultimate Guide for beginners: How credit card works in India?

It is often seen that individuals are not aware of how credit card works in India and due to this they turn down credit offers. What these individuals that it is just irresponsible usage of credit cards can make them fall into the debt trap. Those who use them in a disciplined way can help them save a lot of money in form of cash back, and reward points and it assists them in managing their finances too. 

For those who are not aware much- credit cards are borrowed tools under which issuers allow users to get money on credit within the limit defined by the issuer. One can conduct transactions up to the set limit and need to repay the amount within the due date or opt for EMI Conversion in case of inability to repay the outstanding credit card dues. 

How Credit Card Works in India?

Just a gentle note no interest charged is incurred if all the repayment is done within the given date by the issuer. Finance charges of between 24-49% are incurred only the unpaid credit card dues or withdrawing money through Credit cards from the ATM. 

Moreover, unlike other bank loans such as a car or personal loan, cardholders don’t have to submit an application to avail of instant credit. All that is required is swiping their credit cards or using the same for online shopping. In simple terms, credit cards allow users to borrow funds up to their available credit limit and repay the due within the deadline. When one transacts through a credit card, the transaction amount gets deducted from their credit card limit which is added back when the outstanding dues are repaid. This provides them regular access to the credit card until they use it within the credit limit. 

To explain it more effectively, For instance. 

Suppose you have a credit card having a limit of 40,000 and you bought a fridge at 9000 INR and converted it into EMI for three months and you even spent 1,000 as miscellaneous expenses. Now your credit limit would be 30000 after two transactions. And your credit card bill generated will include an EMI of Rs 3000 and another spent 1,000. Once you repay the credit card due 4000 INR, this same amount will be added to your credit limit and now you would have a credit card balance of 44000. This cycle will continue till you repay the amount. 

However, if you are unable to pay the credit card due in full by the due date finance charges up to 49% on the unpaid bill and late charges up to INR 1300 on their unpaid minimum amount due. 

How Credit Card Works in India?

Now you are familiar with the general working of credit card, let’s discuss how credit card works in India? 

Before we move ahead with the process let’s talk discuss the parties involved in this. 

When you use credit for purchasing something, the merchant asks for the listed info: 

– Credit card number 

– CVV and Expiry Date 

– Your name

Once you have clicked the pay button then an OTP will be delivered to your registered number or mail id for authentication. Once you enter that then the amount would be deducted from your available credit limit. 

However, in the case of transacting offline through a credit card, require swiping their card on the POS Machine for the transaction. 

How to Compare Credit Cards in India?

Those individuals opting for a credit card should be well ensured the benefits associated with a credit card. The comparison must be done on the basis of two factors, firstly your spending pattern and secondly the comparative cost-benefit review. 

For an instance- If someone spends more money on travel as compared to shopping then he/she should go for a travel credit card with benefits provided in the form of cashback, vouchers, and much more. He must choose the card whose benefits surpass it’s annual/joining charges by the wildest margin. Card users should even note that many card issuers on their credit cards offer a reversal of annual fees on conducting spending beyond a predetermined threshold amount. 

Also Read- How Do Credit Card Companies Make Money or Earn?

FAQ’s Related to How Credit Card Works in India

How long does it take to get a credit card in India?

To verify the documents, banks generally take time period of 7 days. And within 10-15 days credit card will be delivered to the registered address.

How does credit card work for EMI?

The EMI is basically calculated on the basis of multiple factors such as rate of interest and the period chosen to repay the amount. 

Should I get a credit card India?

Well answer to that question is simply it depends on you. If you would use it in disciplined manner then it will help you win rewards and cashbacks.


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