The Ultimate Guide to Credit Cards in India

In today’s digital world, digital money is an indispensable part of finance. Therefore, this guide tells you everything you need to know about credit cards in India, from the basics to more advanced ways to use them.

What are Credit Cards?

When faced with surreal specimens of credit cards featuring exquisite designs and various pictures, people often need clarification about the true economic value of these cards.

Credit cards are a type of financial tool that allows an individual to borrow money from a bank or any other financial organization to buy something. They enable you to shop at present and make payment afterwards, unlike debit cards that instantly withdraw cash from your account.

How do credit cards work?

When you use a credit card, you’re essentially taking a short-term loan from the card issuer. At the end of each billing cycle, you will receive a statement that provides a summary of your purchases and the total amount that needs to be paid. You can pay the minimum amount or the full amount. Interest will be added to any sum that is not paid in full.

The Credit Card Market in India

In recent years, the credit card industry in India has experienced substantial growth. The Reserve Bank of India (RBI) reported in March 2023 that there were more than 84 million credit cards in use in the country. This number reflects a 20% year-on-year increase, which shows the growing preference for credit cards among Indian consumers.

Types of Credit Cards

There are many types of credit cards, each made to fit a different set of wants and ways of life.

1. Rewards Cards: Reward cards give you points or cash back when you buy things

2. Travel cards: They give passengers perks like air miles and access to airport lounges

3. Fuel cards: Help you save money when you buy gas

4. Shopping cards: Provide exclusive discounts at partner stores

5. Business credit cards:  Designed to help businesses pay for corporate expenditures

6. Student credit cards: They have lower credit amounts and are made specifically for college students

7. Credit cards with zero balance: No need to maintain a minimum balance

8. Premium cards: Provide exclusive perks for individuals with substantial incomes

Credit Cards for Students in India

Students in India are preferring credit cards massively these days. Usually, such cards offer:

• Lower credit limits
• No or low annual fees
• Cashback on educational expenses
• Discounts on books and online courses

Many banks in India, including SBI, ICICI, and Axis Bank, offer student credit cards. These cards can be used by college students to establish their credit histories at an early age, and this is quite helpful for them in the long run.

How to Apply for a Credit Card Online

To apply for a credit card online, just follow these steps:

1. Explore various card options

2. Verify your eligibility

3. Collect the required documents, such as identification proof, address proof, and income proof.

4. Check out the bank’s website or a comparison portal.

5. Complete the online application form

6. Submit the necessary documents

7. Submit the application and patiently await approval.

The introduction of completely digitized application procedures has made it easy to apply for an Indian bank account. Customers can apply for an account without any stress in the comfort of their own homes.

Benefits of Using Credit Cards

There are several reasons why one should use a credit card:

• Convenience: Easy and secure way to make purchases
• Build Credit History: Regular use and timely payments help build a good credit score
• Rewards: Earn cashback, points, or miles on purchases
• Interest-Free Credit: Most cards offer a 45- to 50-dday interest-free period
• Insurance: Many cards offer purchase protection and travel insurance
• EMI Options: Convert large purchases into easy monthly installments

Business Credit Card Benefits

Business credit card benefits can be particularly advantageous for entrepreneurs and companies.

• Separate personal and business expenses
• Higher credit limits
• Expense tracking and reporting tools
• Additional cards for employees
• Travel perks for business trips
• Cashback or rewards on business-related purchases

A study by Accenture found that 82% of Indian SMEs believe that digital payments, including credit cards, have had a positive impact on their business growth.

Managing Credit Card Debt

While credit cards offer numerous benefits, they can also lead to debt if not used responsibly. Here are some debt management tips:

• Pay your full balance each month
• If you can’t pay in full, pay more than the minimum due
• Keep your credit utilization below 30% of your limit
• Avoid cash advances, which often have high interest rates
• Set up automatic payments to avoid late fees
• Consider transferring the balance to a lower-interest card if you have high-interest debt

Financial Planning with Credit Cards

Credit cards can be a useful tool in your overall financial planning strategy.

• Use rewards cards strategically to maximize benefits
• Take advantage of 0% APR offers for large purchases
• Use credit card statements to track spending and create a budget
• Build and maintain a good credit score for future loan approvals
• Consider using a credit card for recurring bills to streamline payments

Zero Balance Credit Cards

Zero-balance credit cards are becoming popular in India. These cards:

• Don’t require a minimum balance in a linked savings account
• Often have lower income requirements
• May have lower credit limits initially
• It can be a good option for first-time credit card users

Credit Score and Credit Cards

Your credit score plays a crucial role in your credit card journey.

• A good credit score (750+ in India) can help you qualify for better cards
• Regular credit card use and timely payments can improve your score
• Late payments or high credit utilization can negatively impact your score

According to TransUnion CIBIL, as of 2023, the average credit score in India is 715, which is considered “good” but leaves room for improvement.

Credit Card Security

With the rise of digital transactions, credit card security is more important than ever.

• Never share your PIN or CVV
• Enable transaction alerts on your mobile
• Regularly check your statements for unauthorized transactions
• Use secure networks when making online purchases
• Consider virtual credit cards for online shopping

From FY 2021–22, 34.6% of all banking frauds in India were reported by the RBI as being committed using credit cards, highlighting the necessity of being alert.

Future of Credit Cards in India

The credit card industry in India is evolving rapidly.

• Increased integration with UPI and mobile wallets
• rise of contactless payments
• More personalized rewards and offers
• Enhanced security features like biometric authentication
• Growth in co-branded cards with popular brands

A report by Mordor Intelligence projects the Indian credit card market to grow at a CAGR of 25% between 2021 and 2026.

Are you Ready for that Swipe?

Credit cards, when utilized properly, are one of the most effective financial instruments. They are quite useful to consumers because they are easy to obtain, come with benefits in the form of rewards, and help to establish a credit history. Nonetheless, they need to be used wisely, avoiding situations that can lead to debt and other problems.

Raghuram Rajan, former Governor of the Reserve Bank of India, once said, “Credit cards are a great invention, but they can be a curse if not used wisely.” This sentiment encapsulates the essence of credit card usage—a tool that requires knowledge and discipline to be truly beneficial.

There’s a credit card out there for you, no matter whether you’re a student seeking your first one, a professional wanting to maximize rewards, or a business owner aiming to streamline expenses. You can take full advantage of what these financial tools offer by understanding credit cards and making strategic use of them.

Remember, the success of credit card usage is based on informed decisions and responsible monetary behaviour. Start learning continuously when you start using your credit card, be alert throughout its offerings, and use them so that they assist you in attaining your desired financial objectives.