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Your Ultimate Guide: What You Need to Know About Credit Cards

Credit cards are becoming an increasingly popular form of payment mode. The deals, discounts, and rewards you can get from being a credit card holder have never been better. Hence, there is no better time to learn what a credit card is and how to use it to supplement your lifestyle and financial management. 

What is a Credit Card? 

A credit card allows you to borrow funds from your card issuer in order to complete transactions. The amount you borrow must be paid within a stipulated amount of time, typically when your billing cycle ends. When you apply for and receive a credit card, the amount of money you are allowed to borrow from it in a month is decided by your credit score or CIBIL score. This limit is known as a credit limit. 

Why Do I Need a Credit Card?  

As mentioned, credit cards provide access to the best deals available in several lifestyle domains. For instance, if you like to shop, there are credit cards tailored to give you optimal discounts and best reward points for both online and in-store shopping. Similarly, for those passionate about travel, certain credit cards yield significant reward points and discounts on accommodations, tickets, and other related expenses. Clearly, there are many types of credit cards online, so it is important to do sufficient research and choose the credit card that is most rewarding for you. 

If used properly, the reward points system can be a good boon to credit card holders. You can use reward points as a form of payment once you have them in a good number. 

In addition to rewards and discounts, here are some other reasons why you should use a credit card: 

  • It is relatively safer to carry a credit card than large amounts of cash. 
  • Credit cards offer EMI deals allowing you to pay large payments in smaller installments. 
  • If you want to improve your credit score, smart management of your credit card is one of the best ways to do so. Using your credit card limit carefully and paying your bills on time allows lenders to see that you are a trustworthy and responsible customer. 

Cost Structures of a Credit Card 

Since various credit cards are offered in the financial market, the cost structure can vary significantly. Therefore, it’s crucial to choose an option that aligns with your needs. To guide your decision, consider these essential tips:


  • Additional costs: Many credit card transactions come with convenience fees. Seek out a credit card that provides the benefit of a lower fee. 
  • Interest rates: When you use your credit card to make a purchase, the bank typically offers a grace period during which you’re not charged any interest. This period often lasts until a specific date or the end of your billing cycle. If you fail to pay your monthly credit card bill on time, you are charged a credit card interest rate on the amount pending with each passing day. Furthermore, if you take an item on EMI, you will have to pay interest on the pending amount. So, it’s advisable to select a card with low interest rates or those offering no-cost EMIs. 
  • Late payment fees: Delaying your credit card bill payment can result in a late payment fee. The interest rate on a late payment fee is calculated by using the bill amount you have left pending. The percentage is usually very high. Therefore, avoid late payment charges on your credit card at all costs. 
  • Annual fee: Credit card issuers charge an annual and joining fee for credit card services. It’s wise to choose an issuer that provides the most favourable terms, like no joining and annual fees. 

Credit cards are a powerful financial tool that, when used responsibly, offer convenience and rewards. By planning your expenses and staying within your monthly budget, you can maximise the benefits of your credit card. Adopting disciplined and thoughtful spending habits ensures that you maintain a healthy financial state and fully harness the advantages of your card.

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