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Different Types of Credit Cards in India

A diverse range of credit cards in India caters to different needs and preferences. Some popular types include,

Reward Credit Cards - Which offer points for purchases

Travel Credit Cards - Provide travel perks and benefits;

Cashback Credit Cards - Give back a portion of the purchase amount

Premium credit Cards - With exclusive privileges

Shopping Credit Cards - With discounts and rewards at partner stores

Fuel Credit Cards - With cashback or discounts on fuel purchases

Business Credit Cards - Tailored for professionals and business owners.

Documents Required to Apply for a Credit Card

When applying for a credit card, the documents required may vary depending on the issuer. However, generally, you will likely need to submit the following documents:

  • Identity proof: This may include documents such as your Aadhaar card, PAN card, Driving licence, passport, or voter's ID to establish your identity.

  • Address proof: You will typically need to provide documents like an electricity bill, telephone bill, Aadhaar card, or other valid proof of your residential address.

  • Annual ITR (if required): If you are self-employed or have other sources of income, you may need to submit your annual Income Tax Returns (ITR) as proof of your financial standing.

  • Latest salary slips: If you are a salaried individual, submitting your recent salary slips can help demonstrate your income and repayment capacity.

  • Duly-filled application form: This form provides your personal information and serves as a formal request for a credit card.

  • Passport-size photographs: Usually, you will need to provide a couple of recent passport-size photos for identification purposes.

  • Bank statement: Providing your bank statement, typically for the Last Three to Six Months, helps verify your financial transactions and stability.

  • Form 16: For salaried individuals, a Form 16 issued by your employer is proof of your income, taxes paid, and tax deductions.

Which is the Best Credit Card for You?

  • Your spending pattern: Your monthly spending pattern is a significant factor in choosing the right credit card.

  • The reward type: Credit cards offer, Rewards Points, Air Miles & Cashback Rewards.

  • Fees and charges: Compare the interest rate on different cards and the Fees & Charges that Apply.

  • Offers on the card: Some cards have great offers and discounts when you use them to shop on a particular website or when you use them in a specific store.

  • Welcome bonus or gift: Some banks offer welcome gifts and joining bonuses on applying for a card. Gifts could be the latest gadget or bonus points and miles.

  • Payment options: Most cards will allow you to make payments via multiple channels.

New RBI Credit Card Rules Effective 1 December 2022

The Reserve Bank of India (RBI) issued new credit and debit card rules. Here are the new regulations:

Minimum payment due (MPD) will be calculated as the higher of:

  • 100% of all interest, fees, and taxes

  • 5% of the total payment due on the statement

It also includes the higher of:

  • Past due amount

  • Overlimit amount (if any)

  • Equated monthly installment (EMI) amounts due (if any)

The RBI aims to prevent negative amortization, where paying only the minimum balance does not reduce the principal loan. Unpaid charges, levies, and taxes will not be capitalized for charging/compounding of interest. The new methodology ensures that only due interest will be capitalized rather than all unpaid charges, interest, and Taxes. The changes aim to make credit cards more practical for consumers. They prevent negative amortization and ensure that finance charges and taxes are not capitalized in the following billing statement.

  • The outstanding amount will be revised if any payments, reversals, or refunds occur before the payment due date.

  • Late payment charges will be levied only on the revised amount if part payment is made before the due date.

Suspension of Interest-Free Period Explanation:

  • The concept of an interest-free period will be suspended if any balance from the previous month's bill remains outstanding.

  • Card issuers must specify the unpaid amount level at which interest-free credit period benefits will not be available to cardholders.

  • New transactions on the card become eligible for the interest-free period only if the outstanding balance from the previous bill is completely paid off.

Penal Interest and Charges:

  • Penal interest, late payment charges, and related charges will only be levied on the outstanding amount after the due date, not the total amount.

  • Credit card issuers may report a particular account as "past due" to credit information companies (CICs) or impose penal charges only when the account remains past due for more than three days.

Transparency in Credit Card Interest Ceiling:

  • Credit card issuers should prescribe an interest rate ceiling for credit cards in line with other unsecured loans, including processing and other charges.

  • In cases where the interest rate varies based on the payment/default history of the cardholder, there should be transparency in levying such differential interest rates.

  • The prescribed interest rates and the rationale for such rates will be auditable as per the RBI's direction.

  • These changes aim to improve the credit card payment system, protect consumers from negative amortization, and ensure transparency in interest rates and charges.

Features & Benefits of a Credit Cards

Credit cards come with a range of features and benefits. They allow you to make online and in-store secure payments, build a good credit history, and have emergency funds available. You can earn rewards like points or cashback on your purchases, enjoy travel perks such as access to airport lounges and travel insurance, and get protection for your purchases with extended warranties.

Credit cards also offer flexibility to pay off balances over time and provide fraud protection. Overall, they provide convenience and extra advantages for consumers.

Welcome Gift Many banks offer a welcome gift to new credit card applicants once the card is issued through Bonus Reward Points, Vouchers, Discounts, and other Benefits.

Rewards Program All credit cards generally have a reward program, which allows cardholders to earn reward points on every transaction they make using their cards.

Fuel Surcharge Waiver Banks offer a fuel surcharge waiver to the cardholders on spending a specific amount of money on fuel every month.

Cashback Benefits Many credit cards offer cashback benefits to the customers.

Lifestyle Benefits Cardholders can enjoy various lifestyle benefits on their credit cards, such as Offers on Dining, Shopping, wellness, Entertainment, and other Benefits.

Travel Benefits Travel benefits of credit cards include air miles, airport lounge access, travel insurance, airline offers, hotel offers, and other Benefits.

Airport Lounge Access Some credit cards offer complimentary airport lounge access to cardholders. The offer varies from one bank to another.

Add-on Cards Many banks allow their credit cardholders to apply for add-on credit cards for their immediate family members.

Insurance Coverage Some premier cards provide a comprehensive insurance policy that provides coverage against air accidents, life, lost baggage, lost card, outstanding, and other Benefits.

Balance Transfer Credit cardholders can transfer the outstanding balance of their existing cards issued by one bank to the credit card account of another bank.

Global Acceptance Today, most credit cards that are issued in India are international credit cards and are accepted by various merchants all over the world.

EMI Conversion The feature allows the credit card members to convert their credit card transactions into easy monthly instalments (EMIs).

Credit Score Owning a credit card helps you build a healthy CIBIL score. By making timely payments on your card and in full, you receive a positive credit score for credit bureau, CIBIL.

How to Apply for a Credit Card?

You can apply for a credit card, both online and offline.

The Process to Apply for a Credit Card Online

You can Compare & Apply for a Credit Card on BankBazaar by Following 4 Simple Steps:

Step 1: Compare credit card offers.

Step 2: Select from the top cards offered by leading Indian banks.

Step 3: Check your eligibility by entering a few personal details.

Step 4: Enjoy instant approval online after filling out your application form.

Alternately, you can also apply for a card online on the bank’s website by following these steps:

Step 1: Visit the bank's website.

Step 2: Explore the cards offered by the bank.

Step 3: Use the comparison tool if available to compare their features and benefits.

Step 4: Select the card that is the right one for you and hit the 'Apply' button.

Step 5: Fill in the required details and upload all necessary documents.

Step 6: Submit your form.

Note: Each bank may have a different application procedure. Visit the bank's website for more details regarding how to apply for their card online.

How to Use Credit Cards Wisely?

The following are some of the important tips on how to use a credit card:

  • Use the right card for the right purchase

    If you have more than one credit cards, ensure you are using the right one based on your needs. For instance, use a travel credit card if you spend a considerable part of your income on travel such as booking flight tickets, hotels, and more. This way you can earn reward points.

  • Pay the bills into EMIs

    One of the best ways to use credit cards is converting your purchases into EMIs and repay the bills as per your convenience.

  • Opt for a personal loan during emergencies

    Many lenders allow its credit card users to convert their unutilized credit limits into personal loans at a nominal interest. This helps credit card users to meet their urgent needs in no time.

  • Shop online using reward points

    Credit cards offer 2x reward points when you purchase online.

  • Redeem your reward points

    Banks allow its credit card users to redeem their reward points to get discounts on hotel bookings, flight tickets, etc. These reward points provide exclusive shopping vouchers, cashbacks and recharge voucher to the users.

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