What is Credit Card & How to Apply it Online - 2025

Credit cards are magical rectangles designed to lighten your wallet, letting you go cashless and spend without a second thought. Want to know what a credit card is? This guide will help you traverse the basics of credit cards, their uses, their advantages, and more. Read on to explore credit cards more.

What is the Meaning of Credit Cards?

Credit cards can be considered metallic or plastic rectangular cards that a credit card company or bank issues to facilitate the cardholder's credit utilisation to cover expenses while purchasing goods and services from merchants who accept credit card payments. However, after the credit card bill statement is generated, the utilized amount has to be paid back, along with any applicable interest or agreed-upon charges.

How Do Credit Cards Work?

Credit cards are versatile financial instruments that facilitate seamless online and offline transactions. They offer a convenient method for settling a diverse range of bills, contributing to the efficiency and ease of managing financial responsibilities. When you use your credit cards at either of the stores, your credit card details are transmitted to the merchant's associated bank. Subsequently, the bank seeks authorization from the credit card network to process the transaction. 

Following this, your credit card issuer bank verifies your details and further approves or declines your transaction. Upon successful transaction completion, the merchant receives the paid amount, and your credit limit is reduced as per the transaction amount. At the end of the billing cycle, your credit card issuing bank will forward you the monthly statement showcasing your monthly transactions, your previous and new balance, the due date, and the payment due date. 

ALSO READ: Credit Card Against Fixed Deposit

Features of Credit Cards

• Credit cards usually come in metal or plastic card format, which can be swiped at POS to pay merchants.
• Credit cards have a specific credit limit that defines the amount the card owner can spend.
• Credit card transactions also have a payback date generated during the monthly billing cycle. This period usually varies between 30 and 50 days after the purchase. 
• The bank determines the credit card limit, which is issued based on the cardholder's credit history and credit score.
• Credit cards also have a grace period during which you must settle the borrowed amount from your credit card limit with the bank. In addition to this grace period, you are granted an additional 15-20 days between the statement reception date and the deadline for payment. All in all, you get about 45 to 50 days to make the credit card payments. 

Eligibility Criteria For Credit Card

To be eligible to apply for a credit card, the candidate must be 18 years of age and salaried or self-employed. Credit cards are usually offered to people who earn a minimum of 1 to 3 lakhs annually.

The most basic criteria that banks and credit card companies look for are the income and credit score of the customer who wishes to purchase a credit card or is offered a credit card. Employment status and current debts are also crucial for determining whether one can apply for credit cards. Also, it is not mandatory to be a salaried person to apply for credit cards as long as you can submit proof of a stable income, which means you can also get credit cards if you are self-employed or have other earning sources. All you need to do is submit your ITR as proof of income. However, this may vary from bank to bank based on the criteria they set.

Documents Required For Credit Card

Also, you will be required to submit a few documents while applying for a credit card; here are the most common of them:

• Passport-size photographs
• Form 16
• Latest salary slips
• Bank statements
• Proof of identity (passport, Aadhar card, PAN card, etc.)
• ITR
• Proof of business ( in case self-employed)
• Address proof (utility bills, electricity bills, PAN cards, Aadhar cards, etc.)
• Completed form

How to Get a Credit Card?

Credit cards facilitate small monthly loans in the form of purchases and are easily accessible. One can get a credit card with these easy steps:

1. Choose Your Credit Card

Different banks offer a diverse range of credit cards; first, you must choose the type of credit card you wish to apply for based on your requirements and usage pattern. Once you have picked a preferred credit card from a particular bank, you need to check with the bank to see if you can apply for it and find out the documents you need to submit along with the credit card application.

2. Apply for the Card

Once you get a green signal for the credit card, you can submit your credit card application and identity proof, address proof, and other requisites. You can also apply for it online and follow the steps mentioned by the bank from which you seek a credit card. Some credit cards have an annual charge included in your monthly statements. 

3. Card Activation

After completing the credit card application, you will receive the credit card at your doorstep. Next, you have to collect the same, showcasing your identity proof, and you are all set to use your credit card to explore a range of rewards, cashback, and a lot more. But first, you must change the pin to start making transactions.

Credit cards prove beneficial for both making purchases and unlocking potential rewards. Simultaneously, they are crucial in establishing and enhancing your credit history. However, credit cards also come with some associated charges besides letting you borrow money. Here are a few of them:

Advantages and Disadvantages of Credit Cards

Are you applying for a credit card for the first time? Here are a few advantages and disadvantages that you should be aware of while availing a credit card:

1. Advantages

• Credit cards allow easy access to credit, meaning you can purchase now even with no funds available in your bank account and pay later.
• Credit cards help build a line of credit because when you start using them, you create an active credit card history, which can help you seek future loans and rental applications.
• If you have made a large purchase using your credit cards, you can also request EMI plans so that you do not run into a financial crunch, catering to a more significant sum of repayments in one go.
• Credit cards also offer multiple incentives and offers that you can use to benefit from different deals and discounts.
• Using credit cards, you can maintain a record of your purchases.
• Credit cards also offer insurance policies that can be used in case of damaged or stolen credit cards.
• Credit cards offer customers flexible payment opportunities.

2. Disadvantages

• Some credit card companies have hidden costs, so make sure that you research them before applying for one.
• Credit card frauds have also been reported lately; make sure that you do not share your credit card credentials and OTP with anyone else.
• You may pay substantial interest rates if you do not make the credit card payments on time.
• You may easily be tempted to overspend as the amount is not being debited from your account. Thus, you should stay alert while using credit cards to avoid massive debts.
• People also fall prey to the minimum due trap and believe that they have to pay the minimum due amount mentioned in the billing statement as it is mentioned at the top. However, the total outstanding amount is the total that you need to pay and thus check your account statement twice to ensure the exact amount you have to pay.

ALSO READ: What is the Difference Between Credit Card & Debit Card – 2024

Charges Associated With Credit Cards

• Annual Maintenance Charge: This annual fee is charged once a year for using credit cards, and it may vary from bank to bank. However, some banks do not charge such annual charges.
• Late payment charges- These are penalties imposed on individuals who fail to make timely payments.
• Over-limit fee: Every credit card comes with a credit limit. Some banks may or may not allow the credit card holder to spend above their credit limit. However, in cases where banks allow expenses beyond the credit limit, a hefty fee is charged as the over-limit fee when you spend beyond your credit limit.
• Cash advance fee: Some credit cards also let you withdraw cash from your credit card. For any such ATM withdrawals, an additional fee is levied on the amount of withdrawal, known as the cash advance fee. It is generally capped at 2.5% of the withdrawn amount, but it may vary from the bank that offers the credit card.

How to Select the Best Credit Card For Yourself

Selecting a credit card that aligns with your distinct spending patterns and financial plan is crucial for optimizing the value of your card expenditures. Here are a few things that you need to keep in mind when picking a credit card:

• Annual fee
• Interest rate
• Penalties
• Rewards and offers
• Number of cards

How Do You Build a Credit History With a Credit Card?

To build a good credit history using credit cards, you should ensure timely repayments. Make sure that you pay off the outstanding amount on or before the due date every month to reap the dual benefits of obtaining a credit score and enjoying the benefits of free credit usage every month. Paying on time also increases your credit limit over time, based on the credit card issuer's discretion.

How to Get a Credit Card Without a Credit History?

If you do not have a credit history, then it might be a slightly challenging task to acquire a credit card. However, it is not impossible. If you have no CIBIL score, you can apply for a secure credit card that is issued to you against fixed deposits. Almost all banks offer secured credit cards, and thus, you do not have to worry much about the same. The process may hardly take a few minutes as it is issued against a fixed deposit. You can use the credit card to make timely payments to enhance your CIBIL. Banks also offer credit cards based on your savings account and its transactions. In some cases, you can also be issued a credit card against your income proof, which assures the bank that you can pay back.

What are Credit Card Interest Rates?

The interest rates levied on credit card payments usually range between 2.5 and 3.5% a month. However, the interest rates may vary from bank to bank and from one credit card issuer to another. To avoid paying interest, one should ensure timely payment of the credit card dues.

How Does Credit Card Interest Rate Work?

If you have not paid your credit card dues, the credit card issuer will multiply the amount by the credit card interest rate daily and add it to the amount that you owe. The daily rate is calculated by dividing the annual interest rate (APR) by 365.

Example:

For instance, let us take the APR as 20%, and then the daily rate would be 0.05(20/365). So, if you hold an outstanding balance of INR 500, on day 1, the interest will be INR 0.25, which makes the total amount for day 2 INR 500.25. The same steps are followed until you make the payments.

What is the Limit of Credit Card?

The minimum amount due on your credit card is the minimum amount the holder has to pay on or before the due date. This amount usually makes up 5% of the total outstanding amount. Failure to pay the amount may sometimes result in the withholding of any further transactions on credit cards. Thus, you must make the minimum due payments on time to avoid such hassles.

The maximum payment on a credit card is the total outstanding amount. Paying your credit card dues in full is always advisable to avoid interest and penalties.

Do’s and Don’ts While Using Credit Cards

• While applying for a credit card, read all its terms and conditions carefully and clear up queries if you are still determining something.
• Ensuring timely payments of your monthly credit card bills will also help you maintain a good credit card score.
• If you are not able to pay the full amount due due to certain issues, make sure that you pay the minimum amount due at least.
• If you experience any difficulty making payments, contact the credit card issuer to resolve the issue.
• Keep your credit cards safe so that no one uses them unauthentically. Report credit card theft or loss as soon as possible.
• Use your credit cards wisely. This will help you build a good credit history, which can further help you get loans in various sectors.
• Do not buy credit cards under peer pressure. Apply for one only if you want one, and do not fear saying ‘no’ to salespeople.
• Do not open multiple credit card accounts, especially within a short span of time, as this can adversely affect your credit score.
• Do not make late payments on credit card bills, as this can reduce your credit card score and result in additional late payment fees.
• Do not overspend, and utilize your credit cards to the best of your ability. Remember that credit cards are no magical wand that gives you money at any time. In the end, you have to pay back, so only spend an amount that you can afford to pay back.
• Do not apply for new credit cards frequently if you already have existing balances on other credit cards.
• Don't share your credit card number with anyone; stay alert of fraudulent activities.

ALSO READ: IDFC FD Credit Card – How to Apply Online?

What are the Different Types of Credit Cards

Credit cards are available in a diverse range, from fundamental credit cards with modest credit limits and straightforward features to ultra-premium cards that complement a luxurious and extravagant lifestyle. The market is simply overwhelming with the number of choices available for credit cards. Here, we list down a few different types of credit cards that are prevalent in India:

1. Rewards Credit Cards

These credit cards typically offer incentives such as cashback points, cash rebates, or discounts based on a percentage of your expenditures. These cashback points can be availed in varied categories such as fuel, dining options, groceries, and a lot more, based on the offerings of the credit card issuing company. This renders the users a feasible alternative for day-to-day expenditures, especially when they are confident enough to settle the card balance promptly per the payment schedule. 

2. Lifetime Free Credit Cards

As you can make out from the name, lifetime free credit cards are credit cards that do not charge an annual fee or, in some cases, joining fees. Also, one can earn cash points and other rewards while making transactions. Most companies also offer lifetime credit cards to their customers as a promotional activity. 

3. Co-Branded Credit Cards

Co-branded credit cards are those in which banks partner with other shopping brands and websites and launch credit cards that enable purchases on a specific online retail platform. Using these credit cards, customers can avail themselves of good discounts; simultaneously, the websites also attract loyal customers.

4. Travel Credit Cards

Like shopping for credit cards, banks also partner with travel companies to develop travel credit cards that allow frequent travelers and backpackers to avail themselves of huge discounts during their trips. These credit cards can further be used to book travel packages, tickets, and other travel essentials using the reward points one earns while spending on travel activities. To learn more about the best travel credit card, you can hit the internet, do a comparative analysis, and apply for one.

5. Fuel Credit Cards

Fuel credit cards are a merger launched by banks and fuel companies in unity. These credit cards offer some awesome cashback and reward points when you purchase fuel from a petrol pump that partners with the oil company launching the credit card. 

6. Premium Credit Cards

These are some of the most expensive credit card categories that are offered to provide comfort to customers. From providing access to airport lounges, golf course visits, discounts on booking flights, healthcare discounts, and more, these cards offer multiple facilities to the card owner. However, these cards are on the pricier side and cost more when compared to a regular credit card, but they offer customers high-end luxury and comfort.  

Final Word

We hope that this guide helps you understand what a credit card is and lets you discover its perks and hidden secrets. But make sure that you swipe responsibly to avoid overspending because credit cards can be addictive. So apply for a credit card now and buckle up for financial freedom like never before!