{"@context":"https:\/\/schema.org\/","@type":"BlogPosting","@id":"https:\/\/www.indusind.com\/iblogs\/credit-card\/what-is-credit-card-and-how-to-use-it\/#BlogPosting","mainEntityOfPage":"https:\/\/www.indusind.com\/iblogs\/credit-card\/what-is-credit-card-and-how-to-use-it\/","headline":"What is a Credit Card & How to Use It","name":"What is a Credit Card & How to Use It","description":"Credit cards have become more than just a payment tool\u2014they\u2019re your passport to financial flexibility, smarter spending, and timely rewards. But what exactly is a credit card, and how should one use it wisely, especially if you\u2019re new to it? This blog breaks down the essentials of credit cards\u2014from how they work to how to...","datePublished":"2024-08-22","dateModified":"2025-04-23","author":{"@type":"Person","@id":"https:\/\/www.indusind.com\/iblogs\/author\/indusind\/#Person","name":"IndusInd Bank","url":"https:\/\/www.indusind.com\/iblogs\/author\/indusind\/","image":{"@type":"ImageObject","@id":"https:\/\/secure.gravatar.com\/avatar\/8169561f34fb61e737060f1a537a86e2?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/8169561f34fb61e737060f1a537a86e2?s=96&d=mm&r=g","height":96,"width":96}},"publisher":{"@type":"Organization","name":"IndusInd","logo":{"@type":"ImageObject","@id":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/logo-2.png","url":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/logo-2.png","width":201,"height":86}},"image":{"@type":"ImageObject","@id":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/how-to-use-it-credit-card.jpg","url":"https:\/\/www.indusind.com\/iblogs\/wp-content\/uploads\/how-to-use-it-credit-card.jpg","height":288,"width":764},"url":"https:\/\/www.indusind.com\/iblogs\/credit-card\/what-is-credit-card-and-how-to-use-it\/","about":["Credit Card"],"wordCount":2248,"articleBody":"Credit cards have become more than just a payment tool\u2014they\u2019re your passport to financial flexibility, smarter spending, and timely rewards. But what exactly is a credit card, and how should one use it wisely, especially if you\u2019re new to it? This blog breaks down the essentials of credit cards\u2014from how they work to how to make the most of them\u2014so you can swipe with confidence.Understanding Credit Cards and Their UsageA credit card is essentially a line of credit provided by a bank or financial institution. When you make a purchase using a credit card, you\u2019re borrowing money from the issuer with a promise to repay it later. Unlike a debit card that pulls money directly from your bank account, a credit card lets you spend first and settle later.A Guide on Using a Credit Card as a BeginnerYou need to apply for credit card through a bank or financial institution.Once approved and received, you can use the credit card for purchases. Each credit card comes with a unique credit card number, expiry date, and CVV code. When you make a purchase, you provide these details to the merchant. You can do this by swiping the card at a point-of-sale terminal or entering the card details online.The merchant requests authorisation from your credit card issuer (the bank). Once authorised, the transaction undergoes processing. Then, the system adds the transaction amount to your credit card balance.At the end of each billing cycle, you receive a statement detailing your transactions. You need to pay at least the minimum amount due by the due date to avoid late fees.Now that you know how to use a credit card, let\u2019s understand why using it can be a smart move. How Do Credit Cards Work Online?Using a credit card online is quite simple and secure. Here\u2019s how it usually works:At checkout, enter your card details (number, expiry date, CVV).You\u2019ll receive a One-Time Password (OTP) on your registered mobile number or email.Enter the OTP to authenticate the transaction.Once verified, the payment is processed instantly.Most credit card issuers offer multi-layer security for online payments, such as 3D secure and fraud monitoring, to protect you from unauthorised transactions.Types of Credit CardsCredit cards come in many varieties, tailored to suit different financial habits and goals:Reward Credit Cards \u2013 Earn points on everyday purchases.Cashback Cards \u2013 Get direct cashback on transactions.Travel Credit Cards \u2013 Designed for frequent flyers with perks like air miles, lounge access, etc.Fuel Credit Cards \u2013 Offers savings on fuel purchases.Shopping & Lifestyle Cards \u2013 Ideal for regular shoppers, offering discounts at partner stores and platforms.Each type comes with unique features, so it\u2019s important to pick one based on your spending pattern.Eligibility & Documents Required for Credit CardEligibility criteria and documentation vary from provider to provider, but here are some essential requirements you must meet.Age: Typically between 21 and 60 years.Income: Varies on the basis of card type.Credit Score: A good credit score improves your chances of approval.Documents Required:PAN CardAadhaar Card or valid address proofIncome proof (salary slip or bank statement)Some leading banks like IndusInd Bank offer 100% digital application for lifetime-free credit cards without the need of any income proof.Benefits of Using a Credit CardCredit cards offer several advantages that make them a valuable financial tool:1. ConvenienceOne of the biggest benefits of a credit cards is the convenience they offer by allowing you to make purchases without carrying cash. Millions of locations worldwide accept them, both in-store and online.2. Reward Points and CashbackCredit cards offer reward programs where you earn points, miles, or cashback on purchases. You can redeem these reward points for travel, merchandise, or even cash credit. You can browse the bank\u2019s website to learn how to use your credit card to accumulate these reward points. 3. SecurityCredit cards come with enhanced security features to protect you from unauthorised transactions. What\u2019s more? You can also dispute charges if goods or services delivered to you are not as promised.4. Building Credit HistoryResponsible credit card usage helps build your credit history. A good credit history will ensure you can get loans and other credit at favourable interest rates in the future.5. Interest-Free PeriodMost credit cards offer an interest-free period and require the card users to pay the outstanding balance by a predefined due date. This means that you can borrow money at no cost for short periods.6. Emergency FundsCredit cards provide a safety net during emergencies, which allows you access to funds when you need them most.Components of Your Credit CardTo understand what a credit card is, it is crucial to know its various components:1. Card Number: A unique 16-digit number used for transactions and identification.2. Cardholder’s Name: The name of the person to whom the card was issued.3. Expiration Date: The date after which the card is no longer valid.4. CVV (Card Verification Value): A three-digit number on the back of the card used for security in online transactions.5. Magnetic Strip\/Chip: Contains the card’s data and facilitates transaction processing.Some cards may come with additional components. For instance, the IndusInd Bank Nexxt Credit Card is an interactive Credit Card. Hence, it has various interactive elements to enable the cardholder to choose certain options (e.g. EMI tenure) and carry out specific transactions. Credit Card Terminologies You Should Know AboutHere are some credit card terminologies to help you understand the meaning of credit cards in a better way: 1. APR (Annual Percentage Rate): The annual rate of interest the bank charges on borrowed funds.2. Credit Limit: The maximum amount you can borrow using the credit card.3. Billing Cycle: The period between two statement dates during which the bank records the transactions.4. Minimum Payment: The minimum amount you need to pay against the amount due to keep your account in good standing.5. Statement Balance: The total amount due on your credit card at the end of the billing cycle.6. Grace Period: The time between the end of the billing cycle and the payment due date. The bank does not charge any interest during this period if the balance is paid in full.7. Cash Advance: A service that allows cardholders to withdraw cash. This feature may come with a higher interest rate and additional fees.It\u2019s not enough to know the definition of credit cards and related terminologies. Since it is a form of credit, it is important to know how to use a credit card responsibly. Tips on Using Your Credit Card ResponsiblyYou can maximise benefits and avoid debt with responsible usage of your credit card. Here\u2019s how you can go about it:1. Pay Your Bill on TimeAlways pay at least the minimum amount due by the due date to avoid late fees and negative impacts on your credit score.2. Keep Your Credit Utilisation LowTry to keep your credit card balance below a certain percentage of your credit limit. This can help you maintain a healthy credit utilisation ratio.3. Review Your StatementsRegularly assess your credit card statements for any unauthorised charges and to keep track of your spending. Alter your credit card habits accordingly. 4. Avoid Unnecessary DebtUse your credit card for necessary purchases and avoid spending beyond your means. Make full payments on your card balance whenever you can to avoid interest charges.5. Monitor Your Credit ScoreKeep a watch on your credit score and ensure that your credit card usage is positively impacting your credit profile. Also Read: First-Time Credit Card Applicant- 10 Things to Know Before Applying for Your First Credit CardConclusionA credit card can be a powerful tool in your financial toolkit\u2014offering convenience, rewards, and credit-building opportunities. But it also comes with responsibilities. Understanding how your credit card works and using it wisely is the key to unlocking its full potential without falling into debt. Whether you\u2019re a beginner or someone looking to get more from their card, a little knowledge goes a long way in making smart financial choices.Share This:"}