What you need to know about Credit Cards in General

What is a credit card?

A credit card is a plastic card issued to the cardholder that allows him/her to borrow funds to pay for purchasing services and goods. Basically, it is a small loan issued to the cardholder, which he/she has to repay within the stipulated time. The bank imposes interest on the balance if the amount is not repaid on time.

Billing Cycle

A statement is generated every month calculating all your purchases for the previous month. The issued statement is also the bill for your payment. The duration between dates of two consecutive bills is your billing cycle and usually, a billing cycle is month long.

Interest Rate on Credit Card

If the balance is cleared before the due date then there is no interest imposed on the borrower, but if the borrower does not pay within the due date, banks and financial institutions impose an interest on the balance that remains to be paid. Credit card line tools such as loans have greater rates of interest. The interest rate varies from one card to another and is added monthly to the balance if the cardholder fails to clear the balance before the due date.

Due Date

This is the last date before which the cardholder must pay off the balance on the card. The due date includes a grace period that the financial institution provides the cardholder for making the payment.

Grace Period

Banks and financial institutions give the cardholder a few days of grace period to help him/her make the payment. This period varies from one institution to another. The grace period is usually between 25 to 50 days. The grace period is the time period from the date of issue of your statement for the previous month to the due date. For example, if your credit card period is between January 2nd to February 1st and your due date is March 1, you may be allowed to make any interest-free purchases until March 1.

Late Payment Fees

The late payment charges vary for every bank and financial institution and as the name suggests these are charges that will be levied on the cardholder if he/she fails to make the payment on or before the due date.


The bill is a detailed summary of your monthly expenses made using the credit card. A bill is generated monthly over your credit card and also displays the amount you owe against your card with the bank. It also displays the credit available to you. As a cardholder, you can make payments in either of the two ways.

The bill you receive mentions a minimum due amount and a total due amount. The total due amount sums up your entire purchase along with any applicable interest. To avoid late payment charges, a cardholder can choose to pay the minimum due amount, while the rest of the amount will be carried to the next month and subsequent interest will be added on to it. The cardholder can better still pay up the entire amount due along with interest to avoid late payment and interest charges.

Credit Score

The reason many individuals choose to have a credit card is to maintain a good credit score. Maintaining a good credit score makes you eligible for a loan later with the institution. The score is an indication to the bank or the financial

institution to assess your capabilities of returning a loan if lent. A credit score decides your eligibility for a loan, which means regular and timely payment of balance on your credit card improves your chances for getting a loan.


With credit cards, you can avail benefits such as cash backs, discounts and reward points when you use using credit cards for purchases. These cash backs are sometimes waiver of surcharge in fuel or discounts on movie tickets. Further, certain institutions give away flying miles for booking flight tickets with regular use of the credit card. These come as benefits to the credit card holder for using the card and making payments on time.

Add-on Credit Card

Family members of the primary cardholder are eligible for add-on credit cards. Premium credit cards give you the facility of issuing multiple add-on cards for multiple family members. However, whatever the number of cards issued, transactions on these add-on credit cards are linked to the account held by the primary cardholder.

Usually, the credit limits for the add-on cards are almost the same as that of the primary holder’s card. There are banks that may not issue physical add-on cards to the family members but only virtual add-ons to operate. Details of the add-on cards are available online.


Credit cards are a very safe method of making online as well as offline transactions and payments. The magnetic stripe on the card holds all the important data related to the card every time there is a card swipe at the point of sale machine. Each card has its unique pin number that the user has to enter every time it is used.

The card is almost next to non-functional without the pin. Report the loss of card to the bank immediately through customer care so that the card is duly blocked. It is very important that the cardholder keeps the pin number a secret and not share it with anyone.

When using the credit card for online transactions, it goes through two-layered security protection. The first step is to key in the three-digit CVV number unique to every card (provided at the back of the card). A one-time password is generated on the cardholder’s registered mobile number. The two-layered security offers protection from credit card frauds that were at some point rampant.