What Is A Credit Card?
A Credit Card is a financial facility that enables you to make purchases on credit. It is issued by banks and allows you to borrow money up to a predetermined credit limit. As a Credit Cardholders, you can use your card to make all kinds of offline and online payments, without having funds debited from your bank account. When you use your Credit Card for payments, your card issuer typically pays merchants on your behalf and sends you a bill later. This bill is generated on a fixed date each month, known as the billing date and it comprises details of all your transactions, and a due date. You must repay your bill in full to avoid paying interest on your credit card expenses. Credit Cards also offer perks like reward points, cashback, and discounts on purchases. By using the card responsibly, you can manage your finances without accumulating debt.
How Do Credit Cards Work?
A Credit Card is a convenient financial tool that lets you pay for online or offline purchases without using cash. Let’s explore how it works and the important terms you should know.
🔹 What Does a Credit Card Include?
- A unique Card Number and Expiry Date
- The Cardholder’s Name and payment network logo (Visa / Mastercard)
- On the back: a Magnetic Strip or Chip and a CVV number for online use
💳 How Credit Card Transactions Work (Offline)
Here’s what happens when you use your card at a retail store:
- Step 1: You make a purchase and swipe/insert your card at the POS machine. The cashier may ask for your PIN for authentication.
- Step 2: The POS machine reads your card’s chip/strip and sends the details to your issuing bank (e.g., HDFC Bank) for approval.
- Step 3: Once approved, a receipt is printed. You’re billed for the transaction in your next statement, while the merchant receives the payment shortly after.
This entire process runs on secure networks such as Visa or Mastercard.
🌐 How Online Credit Card Payments Work
When you shop online, you’ll be asked for:
- Card Type (Visa / Mastercard)
- 16-digit Card Number
- Expiry Date & CVV
- Name on the Card
- Billing Address (sometimes)
Once you click Pay, the payment gateway securely sends your details to the bank. You’ll receive an OTP (One-Time Password) on your registered number/email for verification. After you enter it, your transaction is complete.
📘 Key Credit Card Terms Explained
- Interest: Charged only if you don’t pay your full bill. Usually 2–3% per month (~36% annually).
- Credit Limit: The maximum amount you can spend, based on your income and credit history.
- Billing Cycle: The fixed duration for your purchases before the bill is generated.
- Minimum Payment: The least you must pay to avoid penalties (interest applies on remaining balance).
- Balance: The unpaid amount that carries forward to the next cycle.
Interested in applying? Apply online for your HDFC Bank Credit Card today!
📝 How to Apply for a Credit Card
- Use your bank’s comparison tool to check different card options.
- Select the card that suits your lifestyle and click ‘Apply’.
- Fill in your personal and financial details, upload documents, and submit the form.