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How Do Credit Cards Work In India

How do credit cards work in India

In today’s world, money is no longer used in the form of cash. In most places we use cards, either a credit card or a debit card for our transactions. Credit cards have come a long way and today they are often used by the common man. A large number of transactions across the world are done using credit cards.


Nowadays the credit card has become an important part of our lives.Credit cards are becoming a popular financial tool as they are helpful to both, the retail merchant and also the card holder. The card holder does not need to carry huge amounts of cash and also has the advantage of buying now and paying later by using the “interest free” time period. For merchants, their business increases as they are able to lure customers into making quick decisions. So in short, it is a win- win situation for both, if done right.

On one hand credit cards can be beneficial but on the other hand they can also be dangerous, leading to excessive spending and financial debts. Therefore it is important to understand the functioning of a credit card.

Some of the important points to be noted are listed below:

 Application for the card

Credit card companies like banks and other financial institutions usually call potential customers to market their credit cards. Banks offer credit cards to customers who already have a bank account and good credit worthiness. You need to be above 18 years of age to apply for a credit card.

Usage of the card

Once the card is received, you can use then the card to make any purchase transaction in a merchant store. The merchant will swipe the card which will then be connected to the respective banking software. All the details of the customer will be verified before the transaction is authorized. Normally banks keep a daily credit limit per card. You are not allowed to spend more than the credit limit. After all the information is vetted the transaction is completed. The bank then pays the merchant the amount and the client has to then pay the amount to the bank, within a certain number of days.

 Payment of the credit card bills

Every month the credit card owner will receive a statement from the bank or from the credit card company. This bill will contain the details of the various purchases made and the total amount due. Now here is the important thing that one needs to keep in mind. The bank pays the merchant instantly, while the card holder pays the bank within a specified period of time. You need to be diligent to pay the bank in the “credit free” period which is “interest free”. Most of us fail to do so and thus end up paying the compounded daily interest on the outstanding amount, which is very high.

Many a time, the card owners pay the small minimum mandatory amount and carry forward the balance amount, which incurs a high interest. This balance outstanding amount along with the interest gets accumulated and becomes a big amount, which is difficult to pay back. The interest rate on the outstanding amount is extremely high as compared to the interest rates for other types of bank loans.

We have thus seen the benefits and the cautions of a credit card. It is important to understand that a credit card can help you to use your credit efficiently if used right, but it is also very easy to find yourself overspending and getting into a huge credit card debt. So you need to make a correct informed choice by limiting the usage of the credit card.

The above are some important information which you should know to understand ” How credit cards work in India “.

To know more please click here credit cards.

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