A credit card is a type of credit facility, provided by banks that allow customers to borrow funds within a pre-approved credit limit. It enables customers to make purchase transactions on goods and services.
Eligibility Criteria for Credit Card
- Age Criteria: You must be at least 18 years old. However, some banks have a minimum requirement of 21 years. The maximum age requirement also differs, and it generally goes up to 60 years.
- Annual salary: Your annual income determines if you’re eligible for a particular card. The minimum salary required to apply for a credit card in India is around Rs.3 lakh p.a. Although, it’s best to check this criterion with your bank as this requirement differs depending on the card issuer you choose.
- Nationality or residential status: Citizens, residents, and non-residents can apply. However, there are a few cards that are only available for Indian citizens.
Benefits of Credit Cards
- Easy access to credit: The biggest advantage of a credit card is its easy access to credit. Credit cards function on a deferred payment basis, which means you get to use your card now and pay for your purchases later. The money used does not go out of your account, thus not denting your bank balance every time you swipe.
- Building a line of credit: Credit cards offer you the chance to build up a line of credit. This is very important as it allows banks to view an active credit history, based on your card repayments and card usage. Banks and financial institutions often look to credit card usage as a way to gauge a potential loan applicant’s creditworthiness, making your credit card important for a future loans or rental applications.
- EMI facility: If you plan on making a large purchase and don’t want to sink your savings into it, you can choose to put it on your credit card as a way to defer payment. In addition to this, you can also choose to pay off your purchase in equated monthly installments, ensuring you aren’t paying a lump sum for it and denting your bank balance. Paying through EMI is cheaper than taking out a personal loan to pay for a purchase, such as a television or an expensive refrigerator.
- Incentives and offers: Most credit cards come packed with offers and incentives to use your card. These range from cash back to rewards point accumulation each time you swipe your card, which can later be redeemed as air miles or used towards paying your outstanding card dues. Lenders also offer discounts on purchases made through a credit card, such as on flight tickets, holidays or large purchases, helping you save.
- Flexible credit: Credit cards come with an interest-free period, which is a period of time during which your outstanding credit is not charged interest. Ranging between 45-60 days, you can avail free, short-term credit if you pay off the entire balance due by your credit card bill payment date. Thus, you can benefit from a credit advance without having to pay the charges associated with having an outstanding balance on your credit card.
- Record of expenses: A credit card records each purchase made through the card, with a detailed list sent with your monthly credit card statement. This can be used to determine and track your spending and purchases, which could be useful when chalking out a budget or for tax purposes. Lenders also provide instant alerts each time you swipe your card, detailing the amount of credit still available as well as the current outstanding on your card.
- Purchase protection: Credit cards offer additional protection in the form of insurance for card purchases that might be lost, damaged or stolen. The credit card statement can be used to vouch for the veracity of a claim, if you wish to file one.
