Understanding Credit Cards Basics: A Beginner’s Guide

Posted on Tuesday, April 25th, 2023 | By Indusind Bank

Credit cards have become a popular form of payment in the country that most people now use regularly. However, if you’re new to the world of credit cards, it can be a bit overwhelming to understand all the terms and jargon that come with it. In this guide, we’ll go over the basics of credit cards and help you understand how they work. 

What is a Credit Card? 

A credit card is a financial tool that allows you to borrow money from a bank or financial institution to make purchases. The money you borrow is known as a credit limit, which is the maximum amount of money you can spend on your credit card. You’re expected to pay back the amount you’ve borrowed each month, and if you don’t, you’ll be charged interest on the outstanding balance. 

How Do Credit Cards Work? 

When you apply for a credit card, the bank or financial institution will evaluate your creditworthiness. Your creditworthiness is determined by a variety of factors, including your credit score, income, and employment history. Once you are approved for a credit card, you will be assigned a credit limit. This limit can vary depending on your creditworthiness and the specific credit card you’ve applied for. 

Once you have a credit card, you can use it to make purchases. Each time you make a purchase, the amount is added to your outstanding balance. At the end of each billing cycle, you’ll receive a statement that shows your outstanding balance, any fees or interest charged, and your minimum payment. You’re expected to pay at least the minimum payment each month, but you can pay more if you want to. 

Paying your balance in full every month will prevent you from being charged any interest. However, if you carry a balance, you’ll be charged interest on the outstanding amount. The interest rate can vary depending on the credit card you have and your creditworthiness. 

Benefits of Using a Credit Card 

1. Convenience 

Paying for purchases with a credit card is super convenient. You don’t have to carry cash, and you can use your credit card to make purchases online or over the phone. 

2. Rewards 

Credit cards offer rewards points for every purchase you make. These reward points can include cashback, points, or miles that you can redeem for travel, merchandise, or other rewards. 

3. Building Credit 

The responsible use of credit cards can aid in building your credit. Your credit history and credit score are important factors when applying for loans, mortgages, or even certain jobs. By making on-time payments and using your credit card responsibly, you can improve your credit history and increase your credit score. 

4. Protection 

Some leading banks like IndusInd Bank offer credit cards that come with one-of-a-kind Total Protect feature that covers you for any unauthorized transactions in case of loss/theft of card. If your credit card is lost or stolen, you can report it and they will investigate and remove any fraudulent charges.  

5. Travel Benefits 

Some credit cards offer travel benefits, such as travel insurance, airport lounge access, and free concierge facilities. If you travel frequently, a credit card that offers accelerated rewards on travel can help you save money and make your travel experience more enjoyable. 

To sum up, credit cards can serve as a valuable financial tool when utilized in a responsible manner. By understanding the basics of credit cards, you can choose the right card for your needs and use it to build credit, earn rewards, and protect yourself against fraud. However, it’s important to be aware of the drawbacks of using a credit card and to use it responsibly to avoid debt and negative impacts on your credit score. 

If you’re looking for a credit card that encompasses all the benefits and rewards to match your lifestyle, check our offerings and you’ll definitely find your ideal pick. IndusInd Bank offers a range of lifetime free credit cards that come with Total Protect feature and enable you to enjoy exquisite privileges and help save more with reward points that never expire.   

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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.