According to the Reserve Bank of India, there were around 25-30 million credit cards in the financial system in 2019 which rose to around 55-60 million in 2020. India is primarily a debit card market with around 800 million cards in the system.
A credit card in India was considered a luxury. The market has started to pick up only now with more people wanting to enjoy the benefits of a credit card.
What is a credit card?
In the simplest language, a credit card is basically a fixed credit or loan amount provided to you by a bank or a financial institution that is linked with a card (just like your ATM card) called a credit card.
You can use this loan amount for any purpose you want by just swiping your card or using your card online. For e.g. online and offline shopping, utility bill payments, insurance premium payments, recharges, fuel, booking travel, and other tickets online and much more.
You can use it even to withdraw cash from an ATM however the charges levied by the banks for cash withdrawal are usually very high.
How credit card works in India?
Here is the working process or working system of a credit card in brief:
- You swipe your credit card in a store and bought for e.g. a T-shirt for yourself worth Rs 1000. (or you may consider any transaction done by you online or offline through your credit card)
- This sum becomes a debit transaction in your card and you need to pay this amount to your bank. You can do further transactions up to the limit of credit card sanctioned to you by the bank.
- There is a particular date in the month say 4 or 10 or 20 (differs for the bank to bank) on which your credit card statement is generated and sent to you through mail or SMS. This is your credit card bill for the month.
- After this date, you get a time of 15-20 days to pay this bill which is on or before the due date.
- In total, you get a time of 45-50 days to use the free credit provided to you by the bank. Yes within this period no interest is charged by the bank on the amount utilized by you. You just need to pay what you spent.
- However if you fail to pay the dues after 45-50 days are over, a high-interest rate and penalty are charged by the bank on the overdue amount and it also adversely affects your credit score.
How to get a credit card in India?
If you wish to own a credit card too there is a basic requirement by all the banks and financial institutions that you must be earning.
Earning may be through a salary, business or profession, etc. However, if you do not earn and still want a credit card then you have the option to get the card against a fixed deposit in the bank.
The next most important criteria are your credit history i.e. have repaid your previous loans regularly on time or not. Banks can get your credit score easily online through CIBIL/CRIF/EXPERIAN/EQUIFAX etc. A credit score between 700-900 is considered good.
However, there are no issues if you haven’t availed any loans earlier. You may not be having a credit score or history nut that does not disqualify you for availing a credit card or in general any credit facility.
Types of credit card in India
Based on the usage and needs of different categories of customers, credit cards are also available in various types. Major credit card categories available in the market areas:
Basic Credit Cards
Designed for normal day to day uses. The standard credit limit with no additional benefits.
Lifetime Free Credit Cards
They also come under the category of basic cards or you can say cards with no annual fees are mostly basic credit cards.
Premium Credit Cards
You can not get it approved if you are applying for your first credit card. These types of cards are for selected people mostly in the higher-income groups and with good credit history with the bank. You get complimentary access to lounges, clubs and even get hotel and travel coupons.
Travel Credit Cards
These are specially designed for people who travel frequently and offer benefits such as travel insurance, offers on ticket bookings, currency conversion rates, etc.
Shopping Credit Cards
They offer benefits for shopping online and offline like discounts and cashback on various stores and websites.
Co-branded Credit Cards
These credit cards are provided by a bank and a brand tie-up an arrangement for e.g. Amazon Pay ICICI card, Flipkart Axis Card, etc. You get special offers while transacting with the brand.
Rewards Credit Cards
These types of cards offer reward points or rewards on every transaction you make using them. The accumulated points can be redeemed as cash, coupons, or a product.
Best Credit Card in India
Reading all these types you may be thinking that ok these are the different types of cards but there have to be some cards in each category which are best among all as the best free credit card in India or the best premium credit card in India or the best cashback credit card in India. The majority of people want a feature-rich lifetime free credit card in India.
Yes, there are cards that are feature-rich and offer better rewards than other cards but you can not easily crown a single card as the best credit card in India. It largely depends on one’s needs and usage. The card you may think is the best as a student may not be the best for someone who is a businessman.
However, for your convenience, I can suggest the major banks in the credit card market which are best in the market and own a greater share in the credit card market in India. They are HDFC, SBI, ICICI, and AXIS.
So according to me, it is always best to rely on the already established ones and. I am confidently suggesting the bank’s as I am using the cards from each one of them.
However if you still insist on suggesting a particular one, I am listing here two good resources you can visit.
Credit card is a vast topic in personal finance and it is updating every day. I have covered only the basics in this article and will focus on more deep concepts in the upcoming articles.