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Credit Cards
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Credit cards are the modern technological marvels that have made our lives very easy. A lot of people are still apprehensive of using credit cards. mymoneykarma simplifies credit cards for new and existing users and tells them all they need to know about credit cards.

What are Credit Cards?

A credit card is a type of currency card issued by a financial company that lets cardholders borrow funds with which they can make purchases. Credit cards charge the cardholders additional agreed-upon charges and interest on the credit amount.

Types of Credit Cards

There are several types of credit cards in India as described below.

Standard credit cards

Standard credit cards are widespread and readily available from most of the banks and other financial institutions. These cards are unsecured and do not require a security deposit.

Balance-transfer cards

Balance transfer credit cards help customers to transfer a high-interest credit card balance onto a credit card with a lower interest rate. The types, terms, and conditions of balance transfer credit cards vary for different banks.

Low interest cards

Some credit cards offer low rates of interest that jump to higher rates after a certain period or single low fixed-rate APR. These are known as low-interest credit cards. Low-interest cards are useful when consumers need to make a large purchase. These cards allow long tenures of several months to a year to pay off the credit.

Rewards programs credit cards

Reward credit cards offer opportunities to users to earn incentives for making purchases with their cards. Points accumulate for each purchase made on the card, and customers can redeem these points for various rewards.

Cash back credit cards

Cash back credit cards allow a customer to earn money while making purchases. Most cash back cards give back users around 1% of total purchases as cash back, excluding interest and finance charges. Most of these cards have an annual fee that can vary from Rs. 250 to Rs. 1000.

Reward points credit cards

Reward credit cards help cardholders accumulate points toward a reward structure based on card usage. Generic reward cards offer cardholders to cash points in for items such as gift cards, beauty products, electronics, plane tickets,  hotel stays, jewelry, pet supplies, etc. Reward programs and promotional offers keep changing; it is essential to review a card’s terms and conditions before applying.

Travel credit cards

These credit cards have their usage specific to hotels and travel. Some cards are co-branded with different travel companies or hotels. These credit cards allow a customer to earn points for all purchases, in addition to bonus points for the money spent on stays at the respective hotel chain. They can redeem the points for free nights and upgrades at the hotel chain their card is co-branded with. Many of these cards have associated annual fees. If a customer is not a frequent traveler, the yearly cost of the card might negate the benefits earned.

Rewards credit cards

Retail rewards credit cards are offered in tandem with a major retailer, such as Flipkart or Customers accumulate points on making everyday purchases and earn even more by making purchases from the partner retailer.

Gas credit cards

Gas credit cards are of two types: generic and brand-specific. Generic cards treat all gas companies equally, while brand-specific cards favor a particular gas company. A generic gas rebate car gives a 5% cashback for buying gas or getting auto maintenance done at any company. A gas-company-specific card gives customers a 5% rebate only when buying gas at that company’s gas stations.

Airline credit cards

These credit cards are a subset of reward cards specifically for air travel. An airline card lets customers earn airline mile credits every time they make purchases. Some cards can also be co-branded with a specific airline, while others may be generic and can be redeemed with a variety of airlines.

Secured credit cards

Secured credit cards are different from standard credit cards and require collateral submission for approval. The security deposit needs to be of equal or higher value than the credit amount. A customer can submit articles like cash, cars, jewelry, stocks or anything else of monetary value as collateral.

Prepaid credit cards

Prepaid credit cards are cards recharged with a specific amount of money.  The advantage of prepaid cards is that there are no additional finance charges and they help a customer avoid debt. With these cards, a customer can determine the credit limit by transferring however much money they would like to have available to spend on the card.

Although most of the prepaid cards do not charge finance fees, there may be other fees such as monthly fees or startup or application fees.

Specialty credit cards

Specialty credit cards are offered to customers with unique credit needs such as students, doctors, or business professionals. These provide several offers and reward programs designed for these customers’ credit needs.

Business credit cards

These credit cards are designed for business owners and offer great benefits such as low introductory rates, cash back programs, and airline rewards. These cards also provide additional benefits and perks for business people such as separate expense account for business and personal use, expense management reports, higher credit limits, and other cards for employees.

Student credit cards

Student credit cards are designed for students enrolled in accredited colleges and universities to help them build a credit history. Compared to other credit cards, student credit cards offer very fewer rewards and benefits.

History of Credit Cards in India

In 1951, the first credit card was launched by New York’s Franklin National Bank for loan customers. In India, Andhra Bank was the first to introduce credit cards in 1981.

How to Get a Credit Card

The process of choosing a credit card involves several easy steps.

  • Choosing a credit card: All banks offer many different credit card options. A customer should first select a card depending on their expected usage and requirements, and the benefits they want. Some credit cards might be great for travel or entertainment, while others may be great for business needs.

  • Applying for a card: Before applying for a card, a customer should get together all their documents such as identity proof, address proof, and income proofs. A customer might get some relaxation if they are an existing customer of the bank.


  • Activating the card: After the approval of the credit card application comes through, a credit card is dispatched to the customer’s communication address. A PIN (personal identity number) is usually couriered to them separately. The customer would need the PIN to authenticate any transaction they do on their credit card. Once they get their credit card and the PIN, they can use the nearest ATM of the concerned bank to change the PIN.

How to Use a Credit Card

Credit cards could are a convenient way to pay for the things people want, but this convenience can come at a cost.  A customer can avoid costly fees and interest with the following tips.

  • Keep track of your credit card spending.

  • Pay your credit card debts on time.

  • Maximize your credit card repayments before the due date.

  • Set a sensible credit limit for your spending.

  • Don’t use credit cards for monthly expenses.

  • Use store cards wisely.

  • Check your credit card statement regularly.

Benefits of Using a Credit Card

  • Most credit cards have some reward programs for their credit card expenditure.

  • Airline credit cards let you rack up flyer miles that could get you massive discounts on airline tickets.

  • You can even get signup bonuses on credit cards.

  • Some credit cards offer cash back on transactions.

  • Travel credit cards offer complimentary travel insurance.

  • Several credit cards also provide a protection price and purchase protection price.

  • Credit cards also offer easy fraud detection.

  • Credit cards offer the choice of convenient and safe online shopping.

  • You can use credit cards in any country.

  • They are great for building your credit score

Disadvantages of a Credit Card

  • Exceeding budgets: The most significant drawback of credit cards is that they encourage people to spend money that they don’t have. People treat credit as free money, but forget that they have to return the amount eventually.

  • High-interest rates: Credit card companies often charge customers massive rates of interest when they do not clear their credit at the end of the 45 days.

  • Credit card fraud: In the instance when a customer’s credit card is stolen, there remains a significant risk of credit card fraud that can be committed with the stolen card. The thief can rack up huge credit card debts for the customer.

It is essential to select a credit card that suits your spending habits and income. You can look up credit cards from various banks on mymoneykarma.