CREDIT CARDS

What is a Credit Card?

short-term & unsecured loan allow the users to make expense that they can pay at a later date. the only difference between borrowing money from someone and using credit card, is a person can actually use money for some period of time without actually paying any interest in case of credit cards.

Components of a credit card

Statement date Payment due date Credit limit Cash limit Transaction details Payment/Funds Transfer Entry Proc fees Interest charges Opening balance Finance charges Minimum amount due

Things you need to know about credit cards

What are the minimum eligibility criteria to get a credit card?

The broad minimum requirements to issue a credit card remains more or less same in terms of age, income proof, resident, educational qualification, etc. Within these parameters, banks are free to set their own benchmarks for varied set of customers.

Besides the minimum eligibility, you would require to submit the following key documents: Copy of PAN Card Salary slip / Certificate (latest) Form 16 (In case of salaried employees) IT returns (latest) Address Proof Identity Proof (Passport/Pan Card/Driving License/Voter ID Card)

Are there separate set of criteria for salaried and selfemployed for getting credit cards?
banks usually set higher eligibility benchmarks for selfemployed customers to accommodate higher risks resulting from fluctuations in their future income. As long as you satisfy issuers benchmarks and prove your creditworthiness, banks will be ready to serve you. banks ask for different documents as income proof like that of IT Returns for pervious years (usually last 2-3 years), which should exceed the minimum income criteria and business details, e.g., client list, orders in hands, location, etc.

A few reasons for rejections of credit card application.

Your credit card application could be rejected if: You dont fulfill the eligibility criteria specified by the bank/NBFCs. Any material information is missing from your application form. You have defaulted on any of your loans or payments to credit card companies in the past. The same would reflect in your credit worthiness report available with CIBIL. You had not made yourself available to the credit investigating agency representing bank/NBFCs. Your close relative are on the CIBILs defaulters list Your area or profession finds place in blacklisted area/profession with the bank/NBFCs. Bank does not have a branch in that area/ city, where you live. In few cases, when you are changing jobs too frequently.

Advantages And Disadvantages Of Credit Cards

Advantages
No immediate cash Free credit Worldwide usage Tracking expenses E-buying Cash withdrawals

Disadvantages
Interest cost Charges Credit trap Multiple credit cards Over spending

How Does A Credit Card Work?

Cardholder: The person who actually possesses the credit card and uses it to pay for transactions. Card issuing bank: The institution that has issued the credit card. It extends the line of credit on the credit card and guarantees payment on transactions made using the card. Merchant: The person who accepts payment through the credit card in return for goods and services. Acquiring bank: The institution that provides the merchant the facility to accept credit cards. The settlement of all transactions made at the merchants shop is done through this bank. Card: The network of several banks that helps facilitate credit card transactions, for example, Visa, MasterCard and so on.

 You hand over your credit card to the merchant. The merchant runs it through his card swiping machine. The machine reads the data on the credit card and transmits the same to the acquiring bank, which has provided the machine to the merchant. The acquiring bank then transmits the data to the card association which in turn passes it to the card issuing bank. The card issuing bank on receiving the data checks whether the credit card is eligible for the requested amount of credit and sends the information back through the same route. All this happens in a matter of seconds. Once your bank has verified that you are eligible for the amount of credit requested, you are free to walk away with your newly-bought clothes. The merchant is paid the money by his bank which in turn collects the same from your bank.

Using the card on the Internet

16-digit card number. type of association for that particular card. credit cards expiry date is also required. CVV number.

How To Select A Credit Card

Interest Rate Credit Card Annual Fees Interest-free Days Perks or Benefits

0% EMI offers on credit card

Part of companies marketing initiatives to boost sales. Festive season-attractive offers Reading the fine print important.

Limited choice
Facility available at select merchant outlets Available on certain products only Merchants strategic tie up with banks Available only on expense above a specific limit.

Its not completely free

Processing fees 3-8% of transaction amount 10.3% service tax Overall credit limit-reduced to the extent of transaction value EMI included into MAD(minimum amount due)

Credit card and statement explained

Logos Number Name Expiry date Magnetic stripe CVV number Signature Contact numbers

Credit card statement

Statement date Due date Late payment fees Interest charges Service tax Cash limit Minimum amount due Joining fees Annual fees Cash withdrawal fees Over limit charges Reward points

Paying only the minimum balance on your credit card will result in higher interest charges

Minimum amount due 5 to 10% Interest rate trap Companys interest to keep you in debts for a longer period

 Decrease in credit free days on your credit card may result in accrual of charges such as interest and late payment fees

Credit card fraud

Skimming Stolen cards Cards sent to wrong address

Security features
Photo identification Digitized signature Cameras in ATM Constant monitoring of transactions Additional password generation

Cash back credit card

Why you should not choose cash back credit card Cash-back offers are available with minimum purchase limit Cash back cards are not free Available on restricted and specific heads of expenses Few networks partners only No clubbing of offers Cash backs dont happen immediately.