Credit cards are among the most versatile and rewarding financial tools available today. Whether you want to earn cashback, collect air miles, enjoy premium travel benefits, manage monthly expenses smarter, or simply build a strong credit score, the right credit card can help you do it all. But with hundreds of cards in the market – each offering different rewards, fees, interest rates, and eligibility criteria – choosing the best one can quickly become confusing. This comprehensive guide breaks down everything you need to know about credit cards in India: what they are, how they work, key terms, types of cards, charges, eligibility, comparison framework, and the best cards across categories. Use this finanjo’s guide as your complete credit card handbook to choose, use, and manage cards wisely.
What is a Credit Card?
A credit card is a financial instrument issued by a bank or NBFC that allows you to borrow money up to a pre-approved limit to pay for purchases, bills, and services. Instead of paying immediately from your bank balance (like a debit card), a credit card lets you pay later within an interest-free period, or convert purchases into EMIs, or carry forward outstanding balances with interest.
In simple terms, a credit card works on the concept of short-term credit: the bank pays on your behalf at the time of purchase, and you repay the bank later on your monthly due date.
How a Credit Card Differs From a Debit Card
| Credit Card | Debit Card |
| You spend borrowed money from the bank (up to your credit limit). | You spend your own money from your bank account. |
| Offers interest-free period. | No interest-free period. |
| Improves credit score if used responsibly. | No impact on credit score. |
| More rewards, cashback, travel and lifestyle benefits. | Limited rewards. |
| Higher risk if bills are unpaid (interest, penalties). | Lower risk since you spend what you have. |
Key Features of a Credit Card
- Credit Limit: Maximum amount you can spend.
- Interest-Free Period: Up to 45–50 days depending on billing cycle.
- Rewards & Cashback: Earn points, cashback, or miles on transactions.
- EMI Conversion: Convert costly purchases into easy installments.
- Global Acceptance: Cards work across millions of merchants worldwide.
- Online & Offline Payments: Use for e-commerce, POS machines, and bills.
- Secure Transactions: Protected by OTP, PIN, and network security layers.
- Add-on Cards: Additional cards for family members sharing the same limit.
Why Banks Issue Credit Cards
Banks issue credit cards because they are profitable when used responsibly or irresponsibly. They earn through:
- Interest charges on unpaid bills
- Merchant fees (MDR) from stores
- Annual fees from users
- Late payment fees and penalties
- Foreign exchange markup charges
This is why banks offer aggressive signup bonuses, cashback, discounts, and lounge access — because long-term revenue often outweighs these benefits.
Benefits of Using a Credit Card
- Builds Credit Score: On-time payments improve your CIBIL score.
- Cashback & Rewards: Earn points/miles on everyday spending.
- Travel Benefits: Airport lounge access, insurance, flight offers.
- Expense Management: Track all spending easily through statements.
- Emergency Credit: Helpful during cash-flow shortages.
- Purchase Protection: Fraud protection and dispute resolution.
- Easy EMIs: Split expensive purchases into manageable monthly payments.
Risks of Credit Cards
- High Interest Rates: 30–48% APR if bills not paid on time.
- Debt Trap: Paying only minimum dues can snowball debt.
- Credit Score Damage: Late payments reduce CIBIL score.
- Overspending: Higher temptation due to easy credit availability.
When used correctly, a credit card is a powerful financial tool — but careless use can lead to long-term debt problems.
Who Should Use a Credit Card?
- Salaried professionals with stable income
- Self-employed individuals with predictable cash flows
- Students (with secured or add-on cards)
- Frequent travellers and shoppers
- Anyone looking to build or improve credit score
Credit cards are safe and beneficial for any disciplined user who can pay bills on time and avoid unnecessary debt.
Credit Limit and Key Credit Card Terms
Understanding credit card terminology is essential to managing your card responsibly, avoiding penalties, and maximizing rewards. This section explains all important concepts such as credit limit, available balance, cash limit, utilization ratio, statement date, due date, interest, penalties, and more — in clear, detailed language.
Credit Limit
Your credit limit is the maximum amount you can borrow from the bank using your credit card. It is assigned when your card is issued and may increase over time based on your usage and repayment behavior.
How Credit Limit Is Decided
- Your monthly income
- CIBIL score
- Past repayment history
- Existing loans and liabilities
- Your employer’s profile (for salaried)
- Banking relationship with the issuer
Types of Credit Limits
| Term | Meaning |
| Total Credit Limit | The maximum amount you can spend using your card. |
| Available Credit Limit | The remaining amount you can still spend (after existing transactions). |
| Cash Limit | The part of your limit that can be withdrawn as cash (usually 10–30% of total limit). |
| Shadow Limit | A temporary internal limit for security when transactions are still pending. |
| Overlimit Facility | Some banks allow you to exceed your limit for a fee. |
Credit Utilisation Ratio (CUR)
The Credit Utilisation Ratio is the percentage of your credit limit you use. It is a critical factor in your CIBIL score.
- Formula: (Total outstanding ÷ Credit limit) × 100
- Ideal CUR: Below 30%
- High CUR → Lower credit score
Example: If your limit is ₹1,00,000 and you use ₹60,000 your CUR is 60% — considered high.
Billing Cycle
The billing cycle is the period between two statement generation dates, typically 28–31 days. All transactions made within this period appear in your statement.
Example: Billing Cycle = 6th to 5th → Statement generated on 5th.
Statement Date
This is the day your credit card bill is generated. All purchases made after this date fall into the next cycle.
- Statement includes: total due, minimum due, transactions, fees, rewards earned.
Due Date
The due date is the last day to pay your bill without incurring interest or late penalties. It is usually 15–20 days after the statement date.
Interest-Free Period
This is the period between the transaction date and the due date during which no interest is charged if the entire bill is paid on time.
- Varies from 18 to 50 days
- Depends on timing of purchase relative to statement date
Tip: Purchases made right after the statement date get the longest interest-free period.
Total Amount Due
This is the complete amount you owe to the bank for that billing cycle — including purchases, EMIs, fees, and interest (if any).
Minimum Amount Due (MAD)
The minimum amount you must pay to avoid late payment fees. Usually 5% of the total due.
- Paying MAD prevents penalties
- But interest is charged on the remaining balance
- No new interest-free period until full amount is cleared
Revolving Credit
When you pay less than the full amount and carry forward the balance, you are “revolving” credit. Banks then charge interest on the remaining amount.
Cash Withdrawal / Cash Advance
Using your credit card to withdraw cash from an ATM. This should be avoided because:
- No interest-free period
- Interest starts immediately
- Cash advance fees of 2.5–3%
EMI Conversion
You can convert large purchases into EMIs to pay over several months. EMI interest typically ranges from 12% to 18% annually.
- No-cost EMI = discount-based (not interest-free)
- EMI cancellation may require a charge
Overlimit Usage
Some banks allow spending beyond your credit limit as a premium feature. However:
- Overlimit fee applies (2–3% of excess amount)
- CIBIL may view this negatively if done repeatedly
Credit Card Rewards Terms
| Term | Description |
| Reward Points | Points earned on transactions, redeemable for vouchers, products, or flights. |
| Cashback | Direct monetary credit to your statement. |
| Miles | Airline loyalty currency redeemable for flights and upgrades. |
| Accelerated Rewards | Higher rewards for specific categories (e.g., fuel, travel, online shopping). |
Other Important Credit Card Terms
- MDR (Merchant Discount Rate): Fee merchants pay to banks on card transactions.
- Foreign Exchange Markup: 1.75%–3.5% extra on international transactions.
- Late Payment Fee: Penalty for missing due date.
- Returned Payment Charge: Applied if your cheque/UPI/auto-debit bounces.
- Add-on Card: A secondary card for family members linked to the same account.
- Contactless Payment: Tap-based payments for faster checkout.
- Virtual Card: A digital-only card for online purchases.
- Tokenization: Masking your card number for online security.
Knowing these terms helps you understand your bill better, avoid interest charges, manage your utilization, and maintain a strong credit score. Mastering these concepts is essential for using credit cards wisely and maximizing their benefits.
How Credit Cards Work ?
Credit cards operate on a simple principle: the bank pays for your purchase at the time of transaction, and you repay the bank later. If you pay the full amount before the due date, you enjoy an interest-free period. If not, the bank charges interest on the outstanding amount.
Behind this simple usage experience is a highly structured financial process involving card networks, issuing banks, merchant banks, and payment gateways. Understanding this mechanism helps you use your credit card more efficiently and avoid unnecessary charges.
Key Entities Involved in Every Credit Card Transaction
| Entity | Role |
| Cardholder (You) | Uses the credit card for purchases or payments. |
| Issuing Bank | The bank/NBFC that gives you the credit card and sets your credit limit. |
| Merchant | The store/website where you use the card. |
| Acquiring Bank | The merchant’s bank that accepts payments. |
| Card Network | Platforms like Visa, Mastercard, RuPay, Amex facilitate transaction routing. |
| Payment Gateway | Secure digital infrastructure for online transactions. |
All these entities collaborate instantly to approve your transaction within seconds.
Step-by-Step: How a Credit Card Transaction Works
- Step 1 – You Make a Purchase: You swipe, tap, or enter card details to initiate payment.
- Step 2 – Merchant Sends Request: The merchant forwards the transaction request to the acquiring bank.
- Step 3 – Card Network Routes the Request: Visa/Mastercard/RuPay sends data to your issuing bank.
- Step 4 – Issuing Bank Verifies:
- Is card valid?
- Is the available credit sufficient?
- Is the transaction pattern safe?
- Step 5 – Bank Approves or Declines: If checks pass, the bank approves the transaction.
- Step 6 – Merchant Gets Paid: The merchant receives money (minus MDR) from the acquiring bank.
- Step 7 – You Repay Later: The transaction appears in your monthly statement to be repaid during the interest-free window.
The Concept of the Interest-Free Period
The interest-free period is the time between the transaction date and the bill due date. This can vary between 18 and 50 days based on:
- Your billing cycle
- The date you make the purchase
Example:
- Statement Date: 5th of every month
- Due Date: 25th of every month
- If you purchase on 6th → ~50 interest-free days
- If you purchase on 4th → ~20 interest-free days
Tip: Use your card right after the statement date to maximise interest-free days.
Total Due vs Minimum Due
| Term | Meaning |
| Total Amount Due | The complete bill amount you owe to the bank. |
| Minimum Amount Due | Small portion (usually 5%) required to avoid late payment fees. |
- Paying only minimum due avoids penalties but does not stop interest.
- Interest starts accumulating on the remaining balance immediately.
What Happens If You Do Not Pay the Full Amount?
- Interest (30–48% APR) is charged on the outstanding balance.
- No interest-free period until the entire pending amount is cleared.
- New purchases start attracting interest immediately.
- Credit score may get affected if payment is delayed beyond due date.
How Banks Make Money Through Credit Cards
- 1. Interest Income: From users who don’t pay full dues.
- 2. Merchant Discount Rate (MDR): Paid by merchant to acquiring bank and network.
- 3. Annual/Joining Fees: Charged on premium cards.
- 4. FX Markup: On international transactions.
- 5. Penalties: Late fee, over-limit fee, returned payment charges.
This mixed revenue model allows banks to offer rewards, discounts, cashbacks, and lounge access to customers.
How Rewards & Cashback Work
- Every transaction earns reward points or cashback.
- Points can be redeemed for vouchers, merchandise, flights, or hotel bookings.
- Cashback reduces your next month’s bill.
- Some cards offer accelerated rewards for specific categories (fuel, travel, online spends).
How Statement Generation Works
- All transactions between two billing dates are included.
- Statement lists → total due, minimum due, transactions, fees, reward summary.
- Invoice is sent via email and mobile app.
Important: Transactions after the statement date go to the next cycle.
How Refunds Work
- When a merchant processes a refund, the amount is credited back to your card.
- If the statement is already generated, it appears as a negative balance.
- Refunds do not count as payments for the current cycle.
How Credit Card EMIs Work
- Big purchases can be converted into EMIs instantly.
- EMI interest varies between 12–18% annually.
- No-cost EMIs are usually discount-based, not interest-free.
- EMI cancellation may involve processing fees.
How Cash Withdrawals Work
- No interest-free period for cash withdrawals.
- Interest starts immediately.
- Cash advance fee of 2.5–3% applies.
Cash withdrawals should be avoided unless absolutely necessary.
Types of Credit Cards in India
Credit cards in India come in various categories designed for different spending patterns, lifestyles, income levels, and financial goals. Choosing the right type of credit card ensures you earn the maximum benefits — cashback, rewards, travel perks, fuel savings, or low-cost credit. Below is a complete, in-depth breakdown of all major credit card types available in 2025.
1. Cashback Credit Cards
These cards offer direct cashback on categories like online shopping, utility bills, groceries, and digital payments.
- Best for: Everyday spenders, online shopping, bill payments
- Benefits: Direct cashback (credited to statement), high returns on digital spending
- Examples: Axis Ace, ICICI Amazon Pay, HDFC Millennia
| Pros | Cons |
| Instant monetary benefit | Cashback caps may apply |
| Simple redemption (auto credit) | Category restrictions |
2. Reward Points Credit Cards
These cards earn points for every transaction, which can be redeemed for vouchers, merchandise, travel, or statement credit.
- Best for: Users with diversified spending
- Benefits: High-value redemption options
- Examples: SBI SimplyClick, HDFC Regalia, Citi Rewards
| Pros | Cons |
| Flexible redemption options | Reward value varies by catalog |
| Better long-term value | Redemption fees may apply |
3. Travel Credit Cards
Designed for frequent travelers, these cards offer air miles, free airport lounge access, priority services, hotel discounts, and travel insurance.
- Best for: Frequent flyers and travellers
- Benefits: Complimentary lounges, flight vouchers, hotel privileges
- Examples: Axis Vistara, SBI Air India, HDFC Regalia, Amex Platinum Travel
| Pros | Cons |
| High-value benefits for travelers | Low value if you don’t travel often |
| Miles can be extremely valuable | Foreign exchange markup applies |
4. Air Miles / Frequent Flyer Cards
These cards focus specifically on accumulating air miles that can be redeemed for free flights, upgrades, or partner rewards.
- Best for: Frequent international and domestic flyers
- Benefits: Miles accumulation, flight upgrades, airline partnerships
- Examples: Axis Atlas, Vistara Co-branded Cards, Air India SBI Signature
5. Fuel Credit Cards
Fuel cards help reduce the cost of petrol/diesel by offering surcharge waivers, reward points, or high cashback on fuel transactions.
- Best for: Daily commuters and vehicle owners
- Benefits: 1%–5% fuel savings, surcharge waiver
- Examples: BPCL SBI, ICICI HPCL, IndianOil Axis
| Pros | Cons |
| Guaranteed fuel savings | Benefits limited only to fuel |
| Good for high mileage users | Partner-specific benefits (HPCL/BPCL) |
6. Shopping & Lifestyle Credit Cards
Offer enhanced rewards for shopping categories like fashion, dining, entertainment, and e-commerce platforms.
- Best for: Frequent online and retail shoppers
- Benefits: Extra rewards, shopping vouchers, brand tie-ups
- Examples: SBI SimplyClick, Flipkart Axis, Myntra Kotak, Amazon ICICI
7. Co-branded Credit Cards
Issued in partnership between a bank and a brand (e-commerce, airlines, hotels, telecom, fuel pumps).
- Best for: Loyal customers of specific brands
- Common categories: Shopping, airlines, hotels, telecom, fuel
- Examples: Amazon Pay ICICI, Airtel Axis, IRCTC SBI, Vistara Axis, Zomato Edition
| Pros | Cons |
| High rewards on partner brands | Lower rewards outside partner ecosystem |
| Exclusive discounts | Limited flexibility in rewards |
8. Business Credit Cards
Designed for SMEs, startups, and self-employed individuals to manage business expenses and improve cash flow.
- Best for: Business owners with recurring expenses
- Benefits: Higher limits, GST invoices, multi-user tracking, travel rewards
- Examples: HDFC Business Regalia, SBI Corporate, ICICI Business Platinum
9. Premium & Super-Premium Credit Cards
High-end cards offering luxury travel, lifestyle perks, dedicated concierge, unlimited lounge access, golf benefits, and superior rewards.
- Best for: High-income individuals
- Benefits: Lounges worldwide, concierge, travel insurance, hotel memberships
- Examples: HDFC Infinia, Axis Magnus, Amex Platinum Charge Card
| Pros | Cons |
| Maximum rewards and luxuries | High annual fees |
| Exclusive travel benefits | Requires excellent credit score and high income |
10. Secured Credit Cards (Against Fixed Deposit)
These cards are issued against an FD and are perfect for beginners, students, or individuals with low CIBIL scores.
- Best for: New to credit or repairing credit score
- Benefits: Almost guaranteed approval, credit limit 80–90% of FD
- Examples: SBI Unnati, ICICI Coral Secured, Axis Insta Easy Card
11. Lifetime Free Credit Cards
These cards have zero joining fee and zero annual fee forever, making them ideal for cost-conscious users.
- Best for: Students, beginners, low spenders
- Benefits: No cost, still get rewards and offers
- Examples: ICICI Amazon Pay, IDFC Classic, AU LIT Card
12. Student Credit Cards
Issued to college students with minimal documentation, usually with low limits and zero annual fees.
- Best for: Students building credit
- Benefits: Low fees, manageable limits, rewards on online spending
- Examples: SBI Student Plus, HDFC Student Forex/credit variants
13. Low Interest / Low APR Credit Cards
These cards offer lower finance charges and are suitable for users who may carry balances or need emergency credit.
- Best for: Users who occasionally revolve credit
- Benefits: Lower interest rates, fewer penalties
- Examples: SBI Advantage, IDFC Low-Interest Variants
Which Type of Credit Card Should You Choose?
- For online shopping: Cashback or co-branded cards
- For travel: Travel or air miles cards
- For fuel: Fuel cards
- For luxury benefits: Premium cards
- For students / beginners: Secured or lifetime free cards
- For businesses: Business credit cards
Selecting the right type ensures maximum savings and rewards based on your spending behavior.
Credit Card Eligibility Criteria
Credit card eligibility determines whether a bank will approve your application and what type of card you qualify for. Banks assess your income, credit score, employment stability, repayment capacity, and risk profile before issuing a card. This section covers all eligibility requirements in detail so you can prepare and improve your chances of approval.
1. Age Eligibility
- Minimum Age: Usually 21 years (some banks allow 18+ for add-on or secured cards)
- Maximum Age: Usually 60–65 years (can vary by bank)
- Add-on Cards: Available for 18+ family members
2. Income Requirements
Income is one of the strongest factors in determining credit card approval. Higher income allows approval for premium cards, while moderate income qualifies for basic or cashback cards.
| Card Category | Typical Monthly Income Required |
| Entry-Level Cards | ₹15,000 – ₹25,000 |
| Mid-Range / Rewards Cards | ₹25,000 – ₹60,000 |
| Premium Cards | ₹75,000 – ₹1,50,000 |
| Super-Premium Cards | ₹2,00,000+ (or high net worth) |
Accepted Income Proofs: Salary slips, Form 16, bank statements, ITR (for self-employed).
3. Employment Type
Banks evaluate the stability and reliability of your employment.
- Salaried Individuals: Higher approval chances if working with reputed companies.
- Self-Employed: Need stable business income and ITR documents.
- Freelancers: Can apply using bank statements and ITR.
- Students: Eligible for secured cards or add-on cards.
4. CIBIL Score Requirements
Your credit score is a major approval factor. Most banks prefer a score of 700 or above.
| CIBIL Score Range | Approval Chance |
| 750+ | Very high approval; eligible for premium cards |
| 700–749 | Good approval chances for most cards |
| 650–699 | Limited to basic cards; some banks may reject |
| 600–649 | Poor; better to apply for secured cards |
| Below 600 | Very low; secured card recommended |
Tip: A clean repayment history significantly boosts eligibility.
5. Existing Relationship With the Bank
Your savings account, FD, salary account, or loan history improves trust and increases approval odds.
- Pre-approved card offers for existing customers
- Higher chance of instant approval
- Better credit limits
6. Debt-to-Income Ratio (DTI)
Banks analyze how much of your income is already used to repay loans.
- Ideal DTI: Below 40%
- High EMIs → Lower approval chances
7. KYC and Documentation Requirements
Mandatory Documents
- Identity Proof (Aadhaar/PAN)
- Address Proof
- Income Proof (salary slip/ITR)
- Bank statements (last 3–6 months)
Additional Documents (if required)
- Employment ID card
- Business registration (for self-employed)
- GST certificate
8. Eligibility for Secured Credit Cards
If you have low income or a low credit score, secured cards issued against an FD are easier to get.
- FD of ₹10,000–₹1,00,000+
- Credit limit = 75% to 90% of FD
- No income or CIBIL score required
9. Employer Category
Some banks maintain internal employer lists based on risk profile:
- Category A: MNCs, Govt jobs → Higher limits, easy approval
- Category B: Reputed private firms → Moderate approval
- Category C: Small organizations → Stricter verification
10. City / Location Factor
Banks may have different income requirements for metro, semi-urban, and rural applicants.
- Metro city applicants often get higher limits
- Non-metro applicants may need more documentation
11. Internal Risk Profile
Banks also assess behavioral data such as:
- Past defaults
- Multiple recent credit applications
- Existing credit utilization
- Industry risk in your employment
How to Improve Your Credit Card Eligibility
- Maintain CIBIL score above 700
- Reduce credit utilization below 30%
- Close unnecessary loans/credit lines
- Avoid multiple card applications within a short time
- Increase your take-home income
- Apply with a bank where you already hold an account
- Start with a secured card to build score
Credit card eligibility is based on income, CIBIL score, profession, and repayment capacity. A strong financial profile ensures approval, higher credit limits, and access to premium cards. Understanding these criteria helps you prepare better and choose cards you are most likely to qualify for.
Charges & Fees: What a Credit Card Actually Costs
Credit cards offer great benefits, but those benefits come with a wide range of charges. This section breaks down every common fee you’ll see on a credit-card statement, explains how interest is calculated, gives typical ranges, and shows clear examples so you can spot and avoid unnecessary costs.
Why Fees Exist ?
Banks earn from credit cards through interest, merchant fees, and service charges. Fees pay for rewards, fraud protection, customer service and the cost of lending. Knowing each charge helps you choose the right card and reduce costs.
Common Credit Card Fees
| Fee / Charge | What it is |
| Annual Fee / Renewal Fee | Yearly charge to keep the card active. Premium cards often have higher fees but more benefits. |
| Joining Fee | One-time fee charged when you get the card (some banks waive it or refund via spends). |
| Finance Charge / Interest | Interest on unpaid balances. Calculated on outstanding amount when you don’t pay the full statement. |
| Cash Advance / ATM Withdrawal Fee | Fee charged for withdrawing cash with your credit card. Interest usually starts immediately. |
| Foreign Currency Markup (FX) | Percentage added on transactions made in other currencies (international cards). |
| Late Payment Fee | Penalty for missing the payment due date. |
| Overlimit Fee | Charge if you exceed your sanctioned credit limit (if the bank allows overlimit). |
| Returned Payment / Dishonour Fee | Fee when an ECS/standing instruction/cheque fails or is returned. |
| EMI/Loan Processing Fee | Charge to convert transactions into EMIs or for personal loan on card. |
| Add-on Card Fee | Fee for supplementary cards issued to family members. |
| Card Replacement / Re-issuance Fee | Cost to replace a lost/damaged physical card. |
| Reward Redemption Fee | Some programs charge to redeem points or miles (rare but possible). |
| Inactivity / Dormancy Fee | Charge if the card has no activity for a long period (not common but exists). |
| GST / Applicable Taxes | Goods & Services Tax on fees and on some service charges as mandated by tax law. |
Typical Fee Ranges (India)
| Fee | Typical Range |
| Annual / Renewal Fee | ₹0 (lifetime-free) to ₹10,000+ (super-premium) |
| Joining Fee | ₹0 to ₹5,000 (often waived or rebated) |
| Interest / Finance Charge (monthly) | ~2.5% to ~4.0% per month (≈30%–48% APR) |
| Cash Advance Fee | 2.5%–3.5% of amount withdrawn + possible flat ATM charges |
| Foreign Currency Markup | 1.75%–3.5% of transaction value |
| Late Payment Fee | ₹100–₹1,000 (depends on outstanding) |
| Overlimit Fee | ₹100–₹1,000 or 2%–3% of excess |
| Returned Payment Fee | ₹200–₹1,500 |
| Card Replacement Fee | ₹100–₹500 |
| Add-on Card Fee | ₹0–₹500 |
| EMI Processing Fee | 0%–2% of transaction (varies) |
How Interest (Finance Charge) is Calculated — Step-by-step Example
Interest is normally calculated on the outstanding daily balance using the card’s monthly rate. Below is an example so you can follow the arithmetic precisely.
- Given: Outstanding balance = ₹10,000. Annual interest (APR) = 36%.
- Step 1 — Convert APR to daily rate: 36% per year ÷ 365 days = 0.098630…% per day.
- Step 2 — Convert percentage to decimal: 0.098630% = 0.00098630 (decimal form).
- Step 3 — Daily interest on ₹10,000: ₹10,000 × 0.00098630 = ₹9.8630 per day.
- Step 4 — Interest for 30 days: ₹9.8630 × 30 = ₹295.89 (rounded typically to ₹296).
- Result: For a ₹10,000 outstanding balance at 36% APR, interest for 30 days ≈ ₹296.
Notes: Banks may use monthly periodic rate (APR ÷ 12) instead of day-count, and rounding rules vary. Always check issuer’s T&C for exact computation method.
Cash Advances — Why They Cost So Much
Cash withdrawals using a credit card combine a cash-advance fee and immediate interest. There is no grace period. Example:
- Withdraw ₹5,000
- Cash-advance fee = 3% → ₹5,000 × 0.03 = ₹150
- Interest at 36% APR (daily) for 10 days before you repay:
- Daily interest decimal = 0.36 ÷ 365 = 0.00098630
- Daily interest amount = ₹5,000 × 0.00098630 = ₹4.9315 → for 10 days = ₹49.32
- Immediate total cost ≈ ₹150 + ₹49.32 = ₹199.32 (plus GST on fees where applicable)
Foreign Transactions — What to Watch
- Banks charge an FX markup on top of the currency conversion rate set by the card network.
- Some cards (travel-focused) offer lower or zero forex markup — valuable for frequent international users.
- Dynamic Currency Conversion (DCC): Merchants may offer to charge in your home currency — usually worse rates. Decline DCC and charge in local currency for better rates.
Late Payment & Overlimit — Effects Beyond Fees
- Late payment triggers a late fee and interest on the entire outstanding balance.
- Multiple late payments damage your credit score and can lead to higher interest rates on future products.
- Overlimit usage shows poor credit behaviour and may lead to limit reduction or account closure in extreme cases.
Hidden / Less-Obvious Charges
- Interest on fees: If you don’t pay the statement, interest accrues on fees too (annual fee can contribute to interest-bearing balance).
- Reward expiry / redemption fees: Points may expire or require a fee to transfer.
- Service charges for statement copies, printed EMIs, or merchant reversals.
How to Minimise or Avoid Fees
- Pay full statement balance every month to avoid interest.
- Use cards with waived annual fees or aim to meet rebate thresholds that refund the fee.
- Avoid cash advances; use personal loans if you need cash at lower rates.
- Turn on auto-debit for full payment to avoid late fees (but ensure sufficient bank balance).
- Choose cards with low FX markup if you travel internationally.
- Negotiate with the bank: ask for annual fee waivers or reduction after a year of good behaviour.
- Monitor statements and dispute incorrect charges immediately.
Negotiation & Fee-Waiver Tips
- If you are a long-standing customer, request an annual-fee waiver — many banks agree to retain customers.
- Ask for a one-time courtesy waiver for late fees if you have a clean history.
- Request lower interest rate or balance transfer offers if you plan to carry a balance.
- Use pre-approved offers and bank relationships to get better pricing.
Balance Transfer & Fee Trade-offs
Balance transfers let you move expensive card debt to another card with a lower rate or 0% offer for a limited time. There is usually a balance-transfer fee (e.g., 1%–3%). Compare the savings:
- If new APR is much lower, paying a 2% transfer fee can still be worthwhile.
- Check for: duration of low-rate window, revert APR after the window, and any processing fees.
Regulatory & Disclosure Notes
Issuers must disclose interest calculation method, charges, and T&C in the card agreement and on statements. Always review the key fact statement before accepting a card. If unsure, ask the bank to explain how they compute interest and which fees attract GST.
Quick Checklist Before You Apply
- Read the schedule of charges and the fine print.
- Check the annual fee vs. benefits — can you recover the fee via rewards?
- Look up FX markup and cash advance terms.
- Confirm the issuer’s interest calculation method (daily balance vs. monthly periodic rate).
- Ask about reward expiries, redemption fees, and add-on card costs.
Bottom line: Fees can erode card value fast, but the right card + disciplined payments + awareness of charges turns a credit card into a net benefit. Always calculate realistic costs (using the step-by-step interest example above) before carrying a balance or taking cash advances.
Credit Card Billing Cycle
The credit card billing cycle is the monthly period during which all your transactions are recorded to generate your statement. It typically ranges from 28 to 31 days, and everything you swipe, spend, or convert into EMI during this period appears in that cycle’s bill.
The cycle ends on your statement date, after which the bank gives you an additional 15–20 day grace period before the due date. Paying your full bill before the due date ensures you enjoy interest-free usage.
Why Billing Cycle Matters
- Determines how many interest-free days you get
- Helps you schedule large purchases for maximum benefit
- Controls when EMIs and refunds appear in your bill
- Affects how much you need to pay in each cycle
Example of a Typical Billing Cycle
| Billing Cycle | 6th to 5th of every month |
| Statement Date | 5th |
| Due Date | Usually 20–25th of the same month |
Transactions made right after the statement date offer the longest interest-free period. Transactions made right before the statement date offer the shortest.
How to Compare Credit Cards ?
Choosing the right credit card can significantly impact your savings, rewards, and overall financial experience. Since each card is designed for a specific user type — shoppers, travelers, fuel spenders, beginners, or premium users — comparing credit cards properly helps you pick the one that gives the maximum value for your lifestyle.
Below is a structured, step-by-step framework to compare credit cards effectively.
1. Identify Your Spending Pattern
Start by analyzing where you spend the most. This determines the type of card that will benefit you the most.
- Online shopping (Amazon, Flipkart, Myntra)
- Dining & food delivery (Zomato, Swiggy)
- Travel (flights, hotels, cabs)
- Fuel (petrol/diesel)
- Groceries & daily essentials
- Bill payments & utilities
- International spending
Pick a card whose benefits match your top 2–3 spending categories.
2. Compare Reward Structures
| Reward Type | Best For | Notes |
| Cashback | Everyday spenders | Simple, direct savings |
| Reward Points | Diverse spending | Good for vouchers & flights |
| Air Miles | Frequent flyers | High value for travel redemptions |
| Co-branded Benefits | Brand loyal buyers | Highest rewards on partner platforms |
Key things to check:
- Points per ₹100 spent
- Category-based rewards (5%, 10% cashback)
- Rewards cap per month
- Rewards expiry
- Reward redemption fees (if any)
3. Compare Annual Fees vs Benefits
Every credit card has a cost, but premium cards often justify their high annual fees with benefits like lounge access, miles, hotel perks, and accelerated rewards.
- Low/No Fee Cards → Good for beginners or low spenders
- Mid-Range Cards → Balanced rewards vs fee
- Premium Cards → Worth it only if you maximise benefits
Checklist: Is the annual fee worth it?
- Do your rewards exceed the annual fee amount?
- Does the card offer spend-based waiver?
- Are the welcome benefits valuable?
4. Look for Hidden Charges
| Charge | Impact |
| Interest Rate | Higher rates increase cost if you revolve |
| Foreign Exchange Markup | Major factor for international users |
| Cash Advance Fee | No interest-free period + immediate charges |
| Overlimit Fee | Penalty for exceeding credit limit |
| Late Payment Fee | Affects credit score + adds interest |
Choose cards with low FX markup if you travel or shop internationally. Avoid cards with complicated or restrictive reward structures.
5. Consider Additional Benefits
Beyond rewards, credit cards often provide lifestyle and travel privileges.
- Airport lounge access (domestic/international)
- Travel insurance & lost baggage cover
- Movie & dining offers
- Fuel surcharge waiver
- Hotel memberships & upgrades
- Concierge services (premium cards)
Ensure these benefits match your lifestyle. A card with lounge access is useless if you rarely fly.
6. Evaluate Redemption Flexibility
Rewards are only beneficial if redemption is easy and valuable.
- Can you convert points to cashback or vouchers?
- Are airline/hotel partners available?
- Is there a catalog or portal?
- Do miles transfer at a favourable ratio?
- Do points expire?
7. Check Eligibility & Approval Ease
- Income requirement
- CIBIL score
- Existing relationship with the bank
- Employment type
Some banks offer instant approval for salary account holders or existing customers.
8. Compare Credit Limit Policies
Higher limits improve credit utilization and enable bigger purchases. Check:
- Initial limit offered
- Frequency of limit increase reviews
- Bank’s track record for rewarding good behavior
9. Mobile App & Customer Support Quality
A great credit card experience depends on how easy it is to:
- Track spending
- Redeem rewards
- Convert to EMIs
- Block/unblock card instantly
- Raise disputes
Strong customer support is essential for resolving fraud or billing issues quickly.
10. Compare Based on Usage Goals
| Your Goal | Best Type of Card |
| Maximum Cashback | Cashback Cards / Co-branded cards |
| Travel Benefits | Miles Cards / Travel Cards / Premium Cards |
| Fuel Savings | Fuel Credit Cards |
| Beginner-Friendly | Lifetime Free / Secured Cards |
| Premium Lifestyle | Super-Premium Cards with lounge & hotel perks |
11. Quick Comparison Checklist
Before finalizing your card, go through this checklist:
- Does the reward/cashback match my spending pattern?
- Is the annual fee worth paying?
- Are rewards capped or unlimited?
- What is the interest rate?
- Is the FX markup low enough for my usage?
- Are welcome benefits genuine or limited?
- How easy is reward redemption?
- Does the bank offer good customer service?
12. Pro Tip: Compare Based on “Effective Reward Rate”
The effective reward rate tells you how much value you actually get back for every ₹100 spent.
Formula:
Effective Reward Rate (%) = (Value of Rewards ÷ Total Spend) × 100
Use this to find the most profitable card for your spending pattern.
Bottom line: The best credit card isn’t the one with the highest rewards — it’s the one that matches your lifestyle, spend categories, and financial goals. Use this framework to evaluate cards objectively and choose the one that delivers the highest real-world value.
Explore all the credit cards with their eligibility, fees, how to apply, reward points structure, and other benefits and find the perfect one for you. – Finanjo’s Credit Cards Hub
Frequently Asked Questions (FAQs) about Credit Cards
This section answers the most common and important questions users have about credit cards — from interest, billing, credit limits, and charges to usage tips, credit score impact, safety, payments, and eligibility. These FAQs help beginners as well as experienced cardholders understand practical scenarios and avoid common mistakes.
1. What is a credit card and how does it differ from a debit card?
A credit card lets you borrow money from the bank up to a pre-set limit and repay it later. A debit card uses your own bank balance. Credit cards offer benefits like interest-free periods, rewards, and cashback, while debit cards do not.
2. How many credit cards should I have?
Most experts recommend having 2–3 credit cards — enough to diversify rewards and maintain low utilization, but not so many that you lose track of payments.
3. Does paying only the minimum due affect my credit score?
Paying the minimum due avoids late fees but not interest. Your credit score remains safe as long as you pay on time, but your outstanding balance will start accumulating interest immediately.
4. What happens if I miss my credit card due date?
- A late payment fee is charged
- Interest applies to the entire outstanding amount
- You lose the interest-free period next month
- CIBIL score may drop if the delay exceeds 30 days
5. Can I withdraw cash using my credit card?
Yes, but it is usually expensive. Cash withdrawals attract:
- No interest-free period
- Immediate interest from day one
- Cash advance fees (2.5–3%)
6. Does using a credit card improve my CIBIL score?
Yes. Paying your bills on time and keeping utilization below 30% helps build a strong CIBIL score. Credit cards are one of the fastest ways to establish credit history.
7. How do I increase my credit limit?
- Maintain on-time payments
- Use the card regularly with low utilization
- Update your income with the bank
- Request a limit increase after 6–12 months
8. Is it safe to use credit cards online?
Yes, as long as you follow basic safety measures:
- Use trusted websites
- Avoid saving card details unnecessarily
- Enable OTP verification and card tokenization
- Use virtual cards for added security
9. What is the ideal credit utilization ratio?
Keep your credit utilization below 30% of your credit limit. Lower utilization helps maintain and improve your credit score.
10. Can I convert purchases into EMIs?
Yes. Most banks allow you to convert large purchases into EMIs either instantly during checkout or later via your banking app. Interest rates for EMIs typically range from 12%–18% annually.
11. Why is my available credit limit lower than my total limit?
Your available limit reduces as you spend. EMIs, pending transactions, or fees may also reduce available credit until the statement is paid.
12. What is the grace period?
The grace period is the time between your statement date and due date, usually 15–20 days. Paying the full balance during this time gives you interest-free usage.
13. Do reward points expire?
Most credit cards have reward expiries ranging between 2–3 years. Some premium cards offer no-expiry rewards. Always check validity in your bank’s app.
14. Should I close my old credit card?
Closing old cards can reduce your credit history length and increase utilization, which may lower your credit score. Avoid closing your oldest card unless necessary.
15. Can I get a credit card without income proof?
Yes — through secured credit cards issued against a fixed deposit or through add-on cards linked to a primary cardholder.
16. Why was my credit card declined?
- Insufficient available limit
- Incorrect PIN or OTP
- Suspicious or risky transaction flagged by the bank
- International transactions disabled
- Card expired or blocked
17. What should I do if I lose my credit card?
Immediately block the card via your banking app or customer care. Banks usually issue an instant replacement for a small fee.
18. Does having multiple credit cards reduce my score?
No. Multiple cards can actually improve your score by lowering utilization — as long as payments are made on time.
19. Can I change my billing cycle?
Some banks allow this upon request. Changing your billing cycle can help align your due date with your salary cycle.
20. Why do I see pending or duplicate transactions?
These may be:
- Temporary authorizations
- Hotel or fuel hold charges
- Merchant settlement delays
They typically adjust within a few days.
21. What happens if the bank reduces my credit limit?
Banks may reduce limits due to inactivity, risky usage, missed payments, or high utilization. Keeping usage healthy and paying on time prevents this.
22. Are lifetime free credit cards truly free?
Yes, if the bank clearly mentions “Lifetime Free” — meaning no annual or joining fees. However, usage charges (late fee, interest) still apply like any other card.
23. Do credit cards offer insurance?
Many cards offer benefits such as:
- Travel insurance
- Purchase protection
- Fraud liability cover
- Air accident insurance
Coverage varies by card category.
24. Which is better: cashback or reward points?
Cashback is simple and direct. Rewards offer higher value for travel and vouchers but require redemption. The best choice depends on your spending pattern.
25. Should I pay my bill before the statement date?
You don’t need to, but clearing your balance early can:
- Lower credit utilization
- Increase your credit score
- Give you more available credit for the next cycle
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