Home » What is a credit card and how to apply for one?

What is a credit card and how to apply for one?

Photo courtesy Emil Kalibadrov on Unsplash.

A credit card is a rectangular piece of plastic or metal issued by a bank or a financial institution that enables a person to borrow money and make payment for the goods that he purchases. There is a limit that is decided by the institution that issues the card and is dependent on the credit score of the person. The cardholder has to pay the borrowed money and the interest if applicable.

There has been a long history of making payments through the barter system, cash, coins, or cheques and many of the means are in use to this day. The progress by mankind is bringing newer technologies to the fore and since the last century, many new forms of payments have been introduced making the transaction system much more convenient.

The world is moving towards a digital society and many cashless and paperless forms of transactions have emerged. Some of them are:-

I) Banking cards

There are different types of banking cards like credit, debit, and prepaid cards that offer customers flexibility and ease of transaction.

A debit card lets a person make a purchase online by drawing money from his checking account. He is not borrowing from a line of credit like in a credit card but the money withdrawn is from his own account.

A prepaid card has money loaded on it. The card can be used to spend the money up to the loaded amount. They are a convenient way to pay for things if you are not carrying cash.

These cards can be used at ATMs, shops, wallets, point of sales (POS) machines, and online transactions.

II) Mobile Wallet

What is a wallet? A person uses a wallet and keeps money in it. Whenever he uses a service he has to pay for it and he takes out money from his wallet and whenever he runs out of money he refills the wallet.

A mobile wallet or e-wallet can be used for carrying cash in digital format. Money can be transferred online to a mobile wallet or even the credit or debit card information in the mobile device can be linked to a mobile wallet. Payments can be made through a smartphone or a tablet instead of using a plastic card. Many activities can be done with the help of a mobile wallet like recharging the prepaid or postpaid phone, paying for a utility like electricity, water, gas, purchasing movie, bus, and train tickets, and booking hotel rooms beside many other activities. Most of the banks have e-wallets like SBI buddy, Axis bank lime, ICICI pockets, and some private companies run it too like Paytm, Mobikwik, Airtel Money, and Jio Money.

III) Internet banking

Internet banking is one of the safest and most convenient ways of adopting digital technology. Net banking allows the completion of any financial transaction through some simple steps. To make the experience even better most of the banks have released their apps which can be downloaded on the smartphone. Net banking can be used for paying the utility bills to booking tickets for the movies, flights and transferring money from one bank to the other.

Reasons for getting a credit card

1. Welcome benefits

Most of the credit cards offer the applicants’ sign-up bonus as against a debit card that offers no initial bonus or various opportunities to earn reward points. This makes it all the more enticing and persons can get bonus reward points that can be redeemed for merchandise, travel, and gift cards.

2. Rewards points

Persons should use the right card for making purchases if he has a few cards, or he should get a card for an activity he indulges in more often. The credit cards offer bonus points for spending in restaurants, fuel, or groceries. When the earnings reach a certain limit threshold, the points can be redeemed and used for travel, merchandise, or gift cards from retailers. If you travel long distances using a fuel credit card is the most beneficial.

It is always wise to choose the credit card that fits into your spending patterns. Using a card that doesn’t match your activity reduces the reward points.

3. Grace Period

The grace period on a credit card is the billing period of thirty days and an additional 15-20 days between the statement generation and the payment due date. As against this if you use the debit card the money is gone right away from your account. Using the credit card the money remains in your account till you pay the bill and if you pay this money from the interest-earning account you will earn money during this grace period too.

4. Insurance

Credit cards have various insurance and each company has its own covers and limits. Some of the most popular insurance covers that are covered with credit cards include accident insurance, travel insurance, credit insurance, and purchase protection.

5. Safety

When your debit card falls in the wrong hands the money can be withdrawn instantly from your account. But in the case of credit cards, you don’t have to pay the money instantly for the transactions you didn’t make until the credit card company resolves the matter. Most of the banks have a zero liability policy and you can opt for it.

6. Personal loan during emergencies

Some of the credit cards enable a person to convert their unutilized credit limit into an emergency personal loan for an interest-free period of 90 days.

7. Building credit score

Using a credit card responsibly will help you to build a good credit score. This can help you in building a credit history and in the future help you to qualify for larger loans.

Eligibility criteria for credit card

There are certain eligibility criteria for getting a credit card and it depends on a number of factors. The main factors considered are:

1. Age- You should be 18 years of age.

2. Income- It varies with different banks.

3. Employment status- A person can be salaried or self-employed.

4. Credit score- The person should have a good credit score of around 700 and above.

The documents required to apply for a credit card are:-

The following documents can be submitted to get a credit card:

ID Proof- Pan Card, Aadhar Card, Passport, Voter’s ID.

Address Proof: Aadhar card, Telephone bill, Electricity bill.

Income Proof: For salaried individuals, it is an Employment letter, salary certificate, or recent salary slips and for self-employed persons, it is a recent ITR statement or the certified financials.

How to apply for a credit card?


Each bank has a slightly different application procedure. Visit a bank’s website for more details and follow the steps mentioned below:

  • Check all the cards offered by the bank.
  • Compare their features and benefits.
  • Select the card that you find fits your needs and click on the ‘Apply’ button.
  • Enter all the necessary details and upload the required documents.
  • Submit the form.


If you wish to get the card offline you can visit the branch of the bank where you have an account and meet the credit card representative.  You can share the requirements with the representative as this will enable him to suggest the best card suitable for you and after this, you can fill out the credit card application form and submit it with the required documents. In a few days, you will receive the card.

Parties involved in the credit card:

  • Cardholder– The person who has the card and uses it to make purchases according to his requirements.
  • Card-issuing bank– The bank or the financial institution that issues credit card to the cardholder.
  • Merchant– The business accepting payment from the card holder for the goods or services sold to him.
  • Acquiring bank– The financial institution that accepts payment for goods or services on behalf of the merchant.
  • Transaction network– The complete system that implements electronic transactions.
  • Insurance providers– They cover the various insurance protection provided by the credit card.

A credit card is one of the instruments for carrying out cashless transactions. It reduces the need for carrying physical cash and the payments are easy to carry out. A person can get a credit card easily if his credit score is good and timely payments will improve his credit score. Being disciplined in making the payments helps in the long run and the reward points can be redeemed with gifts, freebies, and discounts.

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