What is Credit Card? – its Benefits, Working, Uses & Types

Credit cards can be an excellent tool for navigating financial challenges when cash is tight. They allow you to access funds, make necessary purchases, and settle the balance later. A credit card provides you with significant financial freedom if you use it wisely.

What is Credit Card?

A credit card is one of the most popular financial products almost every bank offers. This works on the model of Buy Now Pay Later. This type of credit line allows you to buy something you need if you don’t have the money to purchase it right now. You are given a certain credit limit that is different for everyone based on their credit score, credit history, creditworthiness, and other factors. You can use your credit card up to the provided spending limit, but you must remember that you will have to pay back the amount. If you fail to do so, the outstanding balance will incur interest rates that will keep increasing the repayment amount till you completely get rid of it.

Since today, almost every bank provides a credit card, the competition has increased. Hence, banks are making an effort to attract customers by adding different rewards and benefits to their credit cards. And not just banks but several marketplaces have tied up with different financial partners to give you credit cards designed for your needs. One such platform is Jupiter!

With Jupiter’s Edge CSB Bank RuPay Credit Card, you can conveniently shop, travel, and dine without having to carry separate credit cards for all the different activities. Enabled with UPI, quickly scan and pay any QR code with no inconvenience!

Benefits and Uses of Credit Cards

A credit card is a great financial product to use when you are having a cash crunch. Further, the rewards and benefits available on it are another reason that makes a credit card so tempting to use.

Looking for a credit card that offers more than just rewards?

Get the Edge CSB Bank RuPay Credit Card on Jupiter

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How Do Credit Cards Work?

A credit card is one of the most useful financial products. It allows you to make purchases and pay for them later, covering your financial needs.

But how do you use a credit card? It’s pretty simple to understand how a credit card works once you understand all the components of your credit card carefully. Let’s begin by examining a credit card carefully.

Look at the above image carefully. A credit card contains a number of components that work together. Let’s decode all the labels of the credit card:

• Smart Chip: The smart chip in a credit card is there to provide security. The chip creates a unique transaction code for each purchase, making it difficult for fraudsters to duplicate.
• Card Number: The card number is unique and identifies the credit card issuer and the cardholder. It facilitates transaction processing by providing essential information to merchants and payment processors.
• Cardholder Name: It identifies the authorised user of the credit card and helps verify the cardholder’s identity during transactions.
• Expiry Date: The expiry date mentioned on the credit card helps the merchant authorise your card to process transactions, ensuring the card is valid and current. It also allows banks to monitor card usage and replace cards that may be worn out or compromised.
• Magnetic Stripe: The magnetic stripe on a credit card stores essential information required for processing transactions. This includes the cardholder’s account number, card expiration date, and the card verification code.
• Signature Panel: The signature panel allows you to sign your name to verify your identity during transactions. Merchants can compare the signature on the card with the one on the receipt to help prevent unauthorised use of the card.
• CVV/CVC: The CVV (Card Verification Value) or CVC (Card Verification Code) enhances security during online transactions. It helps verify that you have physical possession of the card, reducing the risk of unauthorised use.

How to Use a Credit Card for Offline Transactions

• 01Once you give your credit card at the checkout counter, it gets swiped or inserted on the POS machine. You are then required to insert the four-digit PIN you have set for offline transactions to authenticate the transaction.
• 02After the card is scanned, the machine continues reading the chip or the stripe on the credit card along with the PIN and sends the information to the credit card issuer. Once everything seems good to go, like credit limit, validity, and identity, the bank will then approve the transaction.
• 03When a transaction gets the green light, the machine produces two charge slips or receipts. The retailer keeps one for their records and hands the other to you. In some uncommon situations where a PIN isn’t needed, the retailer may ask you to sign the charge slip instead.

Important Credit Card Terminologies to Understand

1. Interest Rate

   When you use a credit card, you’re borrowing money from the issuer, similar to taking out a loan, which may incur interest. However, this interest is only applicable if you don’t pay off your full balance by the due date. If you carry a balance, you’ll be charged interest on that amount. It’s also important to note that interest is calculated monthly rather than annually.

2. Credit Limit

   Your credit card will come with a credit limit determined by your credit history, creditworthiness, credit score, income, debts, and more. If you attempt to make a purchase that exceeds this limit, the credit card issuer may decline the transaction. If you have a positive payment record, the credit card issuer may offer you the opportunity to raise your credit limit.

3. Billing Cycle

   This is the specific timeframe during which you can make purchases before receiving your bill. If you shop at the start of this period, you’ll enjoy an extended credit window, giving you more time to pay for those transactions.

4. Minimum Payment

   When you pay your credit card bill, you will come across two options – pay the full amount or pay the minimum balance due. When you choose to make the minimum payment, you will be charged your monthly interest rate on the entire remaining balance until you pay the amount in full.

5. Balance

   A credit balance is the amount that you have spent on your credit card from your credit limit. This is the balance that you haven’t yet paid back.

Types of Credit Cards

There are several different types of credit cards available in India, each serving a different purpose and catering to different financial goals. Below is a list of the most popular ones:

1. 1. Regular Credit Cards

   A regular credit card is perfect for a first-time credit card user as it is simple, convenient, and safe to use, and it offers benefits and rewards.

2. 2. Premium Credit Cards

   Once you become good at using a credit card wisely and have built a good credit score, it’s time to upgrade based on your needs. With a premium credit card, you get a higher credit limit, more benefits, and better reward points to cater to your premium lifestyle.

3. 3. Super Premium Credit Cards

   These cards mostly have super premium benefits like complimentary golf games, exclusive lounge access, personal concierge, best-in-class rewards, and fine dining discounts. Super premium cards are invite-only cards with a higher credit limit meant for people with great credit scores.

4. 4. Co-branded Credit Cards

   The co-branded credit cards are cards meant for a specific purpose. For example, if you are a frequent traveller, getting a co-branded card with a travel company will give you endless benefits like discounts on flights and hotels, lounge access, travel insurance, and more.

5. 5. Commercial or Business Credit Cards

   For managing business-related expenses, a commercial card is your best option. It helps you save on travel costs and simplifies the payment process for your purchases.

6. 6. Cashback Credit Cards

   Cashback or Moneyback cards enable you to earn money back on your regular purchases. The cashback you receive can be used as a reward to pay off your credit card balance.

7. 7. Secured Credit Cards

   Credit cards typically require a minimum income and a good credit score, which can be challenging for homemakers and small business owners. A secured credit card, backed by a fixed deposit (FD), is a viable alternative. This card doesn’t require income proof or a credit score, and the credit limit usually matches the FD amount, which earns interest. If payments are missed, the bank can deduct the owed amount from the FD.

8. 8. Lifestyle Credit Cards

   Lifestyle credit cards come with a range of perks and benefits tailored to enhance your everyday spending. Enjoy exclusive deals on shopping, dining, travel, and much more. Plus, as you use your credit card, you’ll accumulate fantastic rewards for your purchases.

9. 9. Travel Credit Cards

   A travel credit card is a specialised credit card designed to provide unique rewards for purchases related to travel.

10. 10. Shopping Credit Cards

    Shopping credit cards are unique credit cards that provide rewards and benefits specifically for purchases made with the card.

11. 11. Fuel Credit Cards

    A fuel credit card, like its name, is used for filling up gas in your vehicle. This type of credit card offers rewards for refilling fuel and even a surcharge fee waiver.

12. 12. Student Credit Cards

    To open your own credit card account, you need to be at least 18 years old. If you’re between 18 and 21, you might encounter more stringent verification processes, especially for student credit cards aimed at individuals aged 18 to 22. These student credit cards are tailored to meet the unique needs of students, who often have limited credit histories, low incomes, and specific spending patterns.

Want multiple card features in one?

Get the Edge CSB Bank RuPay Credit Card on Jupiter

Apply Now!

 

Major Credit Card Networks in India

The primary credit card networks operating in India are:

RuPay

An Indian domestic payment network, gaining popularity for its focus on financial inclusion and government-backed initiatives. RuPay Credit Cards are ganing more and more market as they are compitiblewith UPI networks

Visa

A global leader, offering a wide range of cards with various benefits and acceptance worldwide.

Mastercard

Another global giant, known for its extensive network and innovative payment solutions.

American Express

Primarily targeting the premium segment with exclusive benefits and services.

Discover

Though less prevalent, it has a presence through partnerships with other networks.

How to Get a Credit Card

1. Research and Compare Cards

   Research all the available credit card issuers and compare the different credit cards, their features, and benefits.

2. Pick the Right Card

   Select the credit card that best fits your financial and personal goals and needs.

3. Enter Personal Details Online

   Go to the credit card issuer’s website and fill out the personal information form.

4. Upload Required Documents

   Upload the required documents asked by the credit card issuer.

5. Submit Application

   Fill out the application form for the credit card and submit it.

6. Await Approval

   Once you submit the form, the credit card issuer will verify your documents and contact you to let you know whether you are approved.

Eligibility Criteria for the Credit Card Application

• Age should be above 18
• Indian nationality
• Must be earning enough income (subjective to different credit card issuers)
• Good credit score

Documents Required for Credit Card

• Income proof
• Address proof
• Residential proof

Credit Card Annual Fees and Charges

There are several charges and fees associated with a credit card on an annual basis that you need to be aware of before applying for a credit card. Take a look at some of the basic fees:

FAQs:

Looking for a Specific Credit Card?

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  Online Shopping Credit Cards

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  Lifetime Free Credit Card

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  Utility Bill Payment Credit Card

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  Insurance Payment Credit Card

Written and Reviewed by:

Priyanka Rao

Author

Priyanka Rao is a content strategist for Jupiter.Money, and specializes in writing on topics related to finance, banking, budgeting, salary & wages, and other financial matters. She has a passion for creating engaging content that resonates with audiences across various digital platforms. In her free time, Priyanka enjoys traveling and reading, which allows her to gain new perspectives and inspiration for her work. With a keen eye for detail and a creative mindset, Priyanka is committed to creating content that connects well with her readers, enhancing their digital experiences.

Priyanka Sharma

Financial Content Reviewer

Priyanka Sharma is the Head of Credit Cards (Sr. Director Business & Product - Credit Cards) at Jupiter Money, where she leads the growth and development of the company’s credit card portfolio. She is responsible for driving strategic initiatives and enhancing customer experiences through innovative credit products. Priyanka’s leadership is shaping Jupiter’s approach to simplifying personal finance for its customers.

Prior to her role at Jupiter Money, Priyanka was an Engagement Manager at McKinsey & Company, where she provided strategic advice to clients across various sectors. Her expertise in business strategy, growth, and operations was built on her strong analytical skills and client-focused problem-solving abilities. Earlier in her career, she worked at ZS, a global business consulting firm, where she contributed to various projects, gaining significant experience in data-driven business decisions.

Priyanka holds a Post Graduate Programme in Management with a focus on Finance, Strategy, and Leadership from the Indian School of Business (ISB), where she graduated with distinction, earning a place on the ISB Dean’s List. This prestigious academic achievement underscores her deep understanding of financial strategy and leadership, which she continues to leverage in her fintech leadership role.