What is a credit card and which one should I get

What is Credit Card & How Does Credit Cards Work?

A credit card is a powerful tool that helps you borrow money from the bank to fulfill your present requirements. In return, there is an agreement with the bank that you will pay back your credit card bills within the stipulated time to maintain a good credit score and avoid additional interest. You can use your credit card to build a good credit score and expand your credit limit in the future.

Now that we know what a credit card is, let’s get in further details regarding how to apply for a credit card online, which are the best credit cards available in the market, types of credit cards, etc.

When to look for a credit card?

Even though the idea of getting a credit card is tempting given all the promotional activities going around. You should always let your money grow for a steady amount of time. It will help you to choose from all the available credit cards in the market. Also, you will not hit debt straight away, since you have money to pay for your credit card bills.

Also Read: How A Secured Credit Card Can Help You Build Your Financial Future

Know your requirement

It is essential to know your requirements before you apply for credit card. Thankfully, in today’s market there are various options to choose from when we talk about credit cards. When applying for a credit card online or offline, you should consider some of the factors like:

  • Credit card eligibility
  • Documents required
  • Credit card fees and charges

Most common types of credit cards:

  • Reward credit cards – You avail reward points on every purchase
  • Fuel credit cards – When you pay for fuel using these cards, you get cashback or credit points
  • Co-branded credit cards – When a card is partnered with a certain brand, shopping from that brand with such a card is extra rewarding
  • Cashback credit cards – As the name suggests, you get various cashback offers on using your credit card

Benefits of having a credit card:

A credit card comes with a predetermined credit limit based on the bank’s assessment of your creditworthiness.

Remember: Credit cards usually have a high interest rate when compared with other loans.

Cashback benefits - In recent years, the number of reward programs have skyrocketed, where banks are offering discounts on every possible purchase.

Building a credit score – If you can build and maintain a steady credit score, your chances to avail a car / home loan in the future increases. Your credit history is related to your credit score.

Substantial purchase power – With a new job in hand, we tend to address our shopping list. A credit card could come to the rescue.

Convert to EMI (Equated Monthly Instalment) - You can convert your credit card bills into monthly easy instalment payments as per the bank’s internal guidelines.

Credit card reward points - A large number of companies are pushing their credit cards into the market with massive credit card reward points. In simple words, this feature allows you to earn credit card reward points whenever you shop using your credit card. You could redeem the acquired credit card reward points to buy other products.

Must Read: Improve Credit Score With A Secured Credit Card

A credit card alternative:

Smart EMI is a smart tool which can help you address your electronics, furniture and other requirements on instalment from leading merchant outlets across India. The process is instant and the features are plenty.  Kotak Smart EMI provides you with No Cost EMI schemes to make your purchase easy.

Credit card risk factor:

Things to remember -

  • Only responsible usage of your credit card will help you to improve your credit score
  • Two main factors to define your credit score are payment history and borrowed amount

Always consider your purchasing power and ask yourself, how long it will take you to pay back. If you are satisfied with the answer, then tally it with the facilities you are getting from your card. Use your card responsibly and try not to miss a repayment date; it will impact your credit score adversely in the long run.


Finally, ask yourself, which is the best credit card for me? Do some online research and then decide to opt for a credit card. Use your credit card regularly and responsibly.

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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.