Credit Card

A credit card is a financial instrument that allows an individual to make cashless transactions. Banks issue credit cards; after making the payments within the specified limit, the consumers are required to pay back the amount used back to the bank. For better understanding, credit cards are derived from Buy Now, Pay Later.

History of Credit Card

• The concept of credit is a way back to ancient time; buying now and paying later is one way business has been carried out. However, the credit card originated in the United States of America in 1920. Firstly, the individual firms issued the credit card to the customers. In the beginning, credit cards were only accepted by the credit card issuer himself. Later on, after 1938, other companies also started accepting credit cards from customers
• The first credit card was made on a piece of cardboard. The card was named Diners Club Card. This card was used for purposes like travelling and entertainment
• Now in this digitalized era, various companies and banks issue credit cards along with various incentives, such as a customer can earn Rewards each time he uses his HDFC Bank credit card to form a procurement

Difference between Credit card & Debit Card

While using a debit card, it is prima facie that your account should have a balance that you seek to use. On using a debit card, the amount from your bank account gets deducted. However, in the case of a credit card, the money is given by the bank within the credit limit set by the customer.

Credit cards and debit cards also differ in their respective credit scores. The use of a credit card can impact your credit scores. On the other hand, there are no such effects on the use of a debit card. Such a credit score is based on certain factors, which are as follows:

• Credit usage
• Credit age
• Payment history
• Credit mix
• Inquiries for new credit

How does a Credit card work?

• Credit cards are used by the customer to pay the bill on their online shopping, in restaurants or in any store. When the credit card is used to make the payment, the card details are forwarded to the merchant’s bank. Then the merchant’s bank asks for authorization from the credit card network to continue the requested transaction. Then the user’s card issuer will make the verification. 

Once the transaction is approved by the card issuer, the merchant gets the payment, and the available credit in a customer’s credit value get reduced by the transaction value.  

Types of Credit Card

In India, countless people use credit cards for their daily cashless transactions. However, many of them are unaware of the different categories in the credit card itself. Some of the types of credit cards are as follows:

• Travel card: This type of credit card is frequently used by frequent travellers. Such cards give the benefits to the user to avail of various incentives and discounts on their booking for flights or hotels

• Fuel credit card: Fuel credit card has evolved as a boon for the users, where simultaneously the fuel prices are rising at the level of clouds. Such credit cards are accepted at every fuel station in India. One of the benefits of using this credit card is that the user get rewards every time he uses this card for his transaction at any fuel station, and the reward is higher than any other credit card

• Cashback credit card: This credit card is preferably used by middle-class people in India. This card provides you with a certain percent of cashback on the total transaction you made every time with the cashback credit card

• Co-branded Credit Cards: This type of credit card is provided by the bank jointly with an associated company. The associated company helps the customers by providing incentives such as discounts and cashback. Certain benefits of using the co-branded credit cards are that it is accepted worldwide, it can be used to make international payments, the user avails the additional loyalty points by the frequent use of this credit card

Other Major Indian Credit Cards

• Gold Credit Card
• Premium Credit Cards
• Airline Credit Cards
• Business Credit Cards
• Balance Transfer Credit Cards
• Low-Interest Credit Cards
• Lifetime free Credit Cards
• Reward Credit Cards

Conclusion

The credit card with the concept of buy now, pay later had acted as a boon for the people who prefer cashless transactions. For a person, it becomes very challenging to carry cash for each transaction. In the present tech-era, credit cards have evolved with various benefits, rewards, incentives, cashback offers, discounts, etc.