A quick guide to credit cards & how they work!

Posted on Monday, July 31st, 2023 | By IndusInd Bank

Credit cards are a popular mode of payment to buy goods and services. But one thing to remember is that when you use a credit card, you are borrowing money from the bank that issued the card, and you have to pay it back later with interest if not paid by due date. But they also offer you various benefits, such as rewards, discounts, insurance, and more. So, let’s try and understand: 

How do credit cards work? 

When you apply for a credit card, the bank will check your credit history, income, and other factors to determine your eligibility and credit limit. The credit limit is the maximum amount of money that you can borrow on your card at any given time. You can use your credit card to make purchases online or offline, as long as you do not exceed your credit limit. 

Every month, the bank will send you a statement that shows your transactions, balance, minimum payment, and due date. The balance shown on the statement is basically the amount of money that you owe on your credit card. And the smallest amount that you have to pay by the due date to avoid late fees is the minimum payment. The due date is the deadline for making your payment. 

You can pay your credit card bill in 2 ways: 

1. Pay the full balance by the due date and avoid any interest charges. 

2. Pay at least the minimum payment by the due date and carry over the remaining balance to the next month with interest. 

The interest rate is the percentage of money that the bank charges you for borrowing money on your card. The interest rate may vary depending on your card type, credit score, and market conditions. The interest is calculated based on your average daily balance and the number of days in the billing cycle. 

To avoid paying interest, you should always try to pay your balance in full every month. If you cannot pay the full balance, you should pay as much as you can above the minimum payment to reduce your interest charges and debt. 

What are the benefits of credit cards? 

Credit cards can offer you many advantages, such as: 

• Convenience: You can use your credit card to pay for anything, anywhere, anytime, without carrying cash. 
• Security: You can protect yourself from fraud and theft by using your credit card instead of cash or debit cards. If your card is lost or stolen, you can report it to the bank and get a replacement. You are also not liable for any unauthorized charges on your card if you report them promptly. 
• Rewards: You can earn rewards points, cash back, miles, or other benefits for every purchase that you make with your credit card. You can redeem your rewards for various products, services, or discounts. 
• Discounts: You can get discounts or offers from various merchants or brands that partner with your credit card issuer. You can save money on shopping, dining, travel, entertainment, and more. 
• Insurance: You can get insurance coverage for travel accidents, medical emergencies, lost baggage, rental car damage, purchase protection, extended warranty, and more when you use your credit card to pay for eligible expenses. 
• Credit history: You can build or improve your credit history by using your credit card responsibly. Your credit history reflects how well you manage your debt and repayments. A good credit history can help you qualify for better loans, mortgages, or other financial products in the future. 

Why choose IndusInd Bank’s credit cards? 

IndusInd Bank credit cards cater to all categories of customers with their unique lifestyles and shopping needs. Whether you are looking for a basic credit card or a premium credit card, you can find one that meets your requirements and expectations. Some of the features and benefits of IndusInd Bank’s credit cards are: 

• Lifetime free credit cards: You can apply for a lifetime free credit card online with IndusInd Bank and get instant approval. You do not have to pay any annual fees or joining fees for these cards. 
  
• Instant credit cards: You can apply for an instant credit card online with IndusInd Bank and get your card within 24-48 hours. You can complete the application process digitally with Video KYC. 
  
• Interactive credit cards: You can apply for an interactive credit card with IndusInd Bank that allows you to switch between multiple payment options at the point of sale. You can choose to pay with credit, rewards, or EMI with the LED buttons on your card. 

• Rewarding credit cards: You can apply for a rewarding credit card with IndusInd Bank that offers you up to 4X reward points on select merchant categories. You can also enjoy welcome gifts, cashback, discounts, and more from various partners. 

Conclusion 

Credit cards are useful and beneficial payment tools that can help you manage your finances and enjoy various perks. However, you should also use them wisely and responsibly to avoid debt and interest charges. To get the best out of your credit card, you should choose one that matches your needs and lifestyle. 

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Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.