Credit Card

Enjoy financial freedom with some of the the best credit card plans tailored by leading Financial Institutions to suit your credit requirement. Don’t forget to visit Market Place to see what the banks are offering you basis your credit eligibility.

What is a Credit Card?

A Credit Card is an instrument issued by a financial institution which allows the user to make purchases on credit, up to a predefined credit limit. A credit limit is the maximum amount that can be spent or borrowed using the credit card. The limit varies for different borrowers and lenders as it is determined based on the borrower’s income, source of income, credit score, repayment history, and other personal details.

What are the different types of Credit Card?

Depending on the Credit Institution, there are various types of credit cards, such as Signature, Platinum, Gold or Silver. There are also other category cards which appeal to a particular segment. Cards such as Miles card for frequent flyers or a movie card for movie enthusiasts. The type of card that is offered is based on the consumer’s borrowing power (based on his income & credit history) and each card type offers different offers, schemes and reward points.

How to apply?

It’s a good practice to first check if your CIBIL TransUnion Score and CIR is in order because lenders often view this as one of the first primary checks for approval of a credit card. Ensure you have a high credit score, and your repayment history does not have default payments because that may negatively affect your chances of getting approved. You can then approach any Bank and apply for a credit card basis your requirement.

Why should I get a Credit Card?

Having a credit card enables you to make purchases beyond your budget while allowing you to pay back a full/part of the amount on a monthly basis. It is a facility that lets you borrow money on short notice and repay it back in installments (if required). A credit card also offers other perks in the form of rewards schemes and benefits; Miles are awarded if you spend a specific amount on airlines, reward points are awarded for spending a certain amount every month on shopping, etc (This varies from card to card and lending institution). These offers change from time to time but the accumulated points can later be redeemed for various other items depending on the credit card issuer’s policy.

What are the charges that can be levied on a Credit Card for late payment?

If you do not pay the “Minimum Amount Due” by the due date, then late payment fees are levied along with the interest charge on your outstanding amount. This late payment fees ranges from   250-1000, depending on the financial institute and type of card. Also, non-payment by the due date negatively impacts your Credit Score, which in turn may affect your future borrowing and bargaining capacity.

How is the interest rate calculated on Credit Card outstanding?

If you pay only the minimum due or do not pay at all by the due date, then the interest rate as applicable will be levied on your outstanding. Most Credit Card issuers follow the average daily balance method. Assuming the payment is not made within the grace period or the interest-free period (often between 45-60days). This interest rate can be as high as 36% p.a. Lets look at the below example –

Date Transaction details Amount
10 September Purchased Gadget 15000
15 September Purchased Jewellery 5000
18 September Payment Due date
15 October Payment mode 2000
16 October Fuel purchase 1000
17 October Payment made 15000

*Since the individual paid post the due date, the entire outstanding balance will attract interest rate and a late payment penalty.

The charges calculated are as below –

Interest on   15000 @ 2.65%pm from 18 September to 15 October (i.e. for 28 days)
((15000 x 2.65 x 12 x 28)/365)/100 =  365.91

Interest on   13000 @ 2.65%pm from 15 October to 17 October (i.e. for 3 days)
((13000 x 2.65 x 12 x 3)/365)/100=  33.97

Interest on   5000 @ 2.65%pm from 18 September to 17 October (i.e. for 30 days)
((5000 x 2.65 x 12 x 30)/365)/100 =  130.68

Interest on   3000 @ 2.65%pm from 17 October to 18 October (i.e. for 2 days)
((3000 x 2.65 x 12 x 2)/365)/100 =  5.22

Interest on   1000 (fresh spends @ 2.65%pm from 16 October to 18 October (i.e. for 3 days)
((1000 x 2.65 x 12 x 3)/365)/100 =  2.61

Thus total interest = (365.91 + 33.97 + 130.68 +5.22 + 2.61) =  538.39

What do the lenders look for?

With credit card applications, lenders look at personal details & credit behavior closely. The higher the credit score and cleaner the credit report, the better the chances are for getting a credit card.

What should I look out for?

With a credit card, always make payments on time because the late payment fees is very high, around 15% of minimum payment due or 2.5% of the total outstanding balance. Another thing to watch out for is the closing of the credit card account; ensure the bank closes the account or else the charges will keep rising and it may be viewed as outstanding payment, which will affect your CIR and credit score.