Credit Cards: All That You Need to Know

With monthly credit card spending exceeding 1 Lakh Crores, these financial instruments have become integral to many people’s lifestyles in India. Over 1.9 million people opted for credit cards in India in the last month of 2023 alone.

As India will soon hit the 100 million mark for credit cards, it is crucial to know their basics. Understand the ins and outs of these cards to make the most out of them and avoid debts.

What is a Credit Card?

A credit card is a physical or virtual card that extends a short-term line of credit. You can use the card’s credit limit to pay your bills, make payments, and withdraw cash.

However, they differ from short-term loans, as the issuers don’t charge interest if you pay the bill in full before the due date. What’s more, you save money through cashback and discounts on your everyday purchases.

How Credit Cards Work?

You can use them to pay bills online or make in-store purchases. Here is how it functions:

  • When you use this card, the merchant’s bank receives your card details
  • The banks then initiate an authorisation process from the credit card network
  • The issuing bank makes the payment if the verification of your card information is completed
  • The card issuer deducts the amount from your available credit limit
  • You can pay the due amount at the end of the billing cycle
  • If you carry the balance forward, you will have to pay interest charges on the outstanding balance

Important Terms You Should Know

To make the most out of your card, be familiar with the general terms associated with it. They include: 

  • Credit Card Number: It is a 16-digit unique code embossed or printed on your card.
  • Expiration Date: Found either on the front or back of the card, it indicates the month and year from which the card will cease to work.
  • CVV Number: It is a 3-digit security code on the back of your card used for online transactions.
  • Credit Limit: It is the ceiling on the amount that you use for spending.
  • Billing Cycle: The billing cycle is the time frame between the last and current account statements, which typically varies between 25-30 days.  
  • Annual Percentage Rate: This determines the interest rate you will pay on the outstanding balance.
  • Grace Period: The time frame between the last billing cycle and the next payment due date when the issuer doesn’t levy interest.
  • Annual Fees: Premium cards often come with a yearly fee, which can be waived if you exceed the minimum spending limit.
  • Late Payment Fee: If you miss a payment, your card issuer will charge a penalty.
  • Cash Advance: This is simply a cash withdrawal using your card. Unlike other transactions, it starts incurring interest immediately.
  • Rewards: Enjoy rewards in various forms, like points, miles, or cashback. Choose a card that best fits your lifestyle and spending preference.

Why Use a Credit Card?

Here is why it makes sense to apply for a credit card if you already don’t own one:


  • You don’t have to carry cash with these cards in your wallet.
  • What’s more, you can make online payments without any hassle.
  • It is safer than cash, as you can block these cards immediately online.

Deferred Payment

  • You can opt for the ‘Shop now and pay later’ facility for your urgent needs.
  • They also allow you to convert big purchases into manageable EMIs.

Record of Usage

  • Card companies provide account statements at the end of every billing cycle.
  • You can keep track of all your spending and optimise it based on this statement.

Perks and Initiatives

  • You can save big on your everyday expenses with their rewards discounts.
  • They offer cashback, points, or miles on every transaction, which you can redeem for attractive offers.

Access to Funds in Emergencies

  • Since these cards are short-term credit facilities, you can utilise them during unforeseen expenses
  • For instance, you can use your credit card to meet unexpected hospital bills

Learn Financial Discipline

  • Responsible use of credit is an important financial lesson
  • Those who are new to credit can avail of secured cards to build their credit history

Access to Privileges

  • Credit cards have a range of privileges as complimentary benefits
  • For instance, some cards may offer complimentary airport lounge access or free OTT platform subscriptions
  • Some premium credit cards may also provide access to golf courses

Now that you know the basics of credit cards, you can decide which one to choose. If you wish to apply for a credit card that increases your purchasing power while providing attractive benefits, get the One Credit Card.

Also Read: Navigating Instant Personal Loans for Quick Financial Relief

Backed by a powerful application, this premium metal card offers 5X rewards on select transactions or exclusive discounts on shopping. You can redeem these points to plan foreign vacations and get discounts on dine-outs. Apply now to reap all its benefits.