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Credit card faq


1. What is a credit card?

A credit card is a payment card issued by a financial institution that allows cardholders to borrow money to make purchases. It enables users to access a pre-approved line of credit, which must be repaid, without any interest or fees, if paid within a specified period.

2. What are the 4 types of credit cards?

The four main types of credit cards are:
  1. Standard Credit Cards: These are basic credit cards that offer a predetermined credit limit and may include features like rewards or cashback.
  2. Rewards Credit Cards: These cards offer rewards, such as points or cashback, for eligible purchases made using the card.
  3. Secured Credit Cards: Secured cards require a cash deposit as collateral, making them suitable for individuals with limited or poor credit history.
  4. Business Credit Cards: A business credit card is a type of credit card offered to business owners to manage work-related expenses.

3. How does a credit card work?

A credit card works by allowing cardholders to make purchases up to a predetermined credit limit. When a purchase is made, the card issuer pays the merchant on behalf of the cardholder. The cardholder is then responsible for repaying the issuer by the due date, either in full or through minimum monthly payments. If the balance is not paid in full, interest is charged on the remaining amount.

4. What are the benefits of using a credit card?

The benefits of using a credit card include:
  1. Convenience: Credit cards offer a convenient way to pay for purchases, whether you're shopping at a store or online.
  2. Build Credit History: Responsible use of a credit card can help build a positive credit history, which is important for future loan approvals.
  3. Rewards and Perks: Many credit cards offer rewards programs, cashback, travel benefits, discounts, and other perks for cardholders.
  4. Security: Credit cards offer fraud protection and dispute resolution mechanisms, making them safer than carrying cash.
  5. Emergency Funding: Credit cards can be used as a financial backup in case of emergencies or unexpected expenses.

5. What are the different types of credit cards available?

There are various types of credit cards available, including:
  1. Travel Credit Cards: These cards offer travel-related benefits like air miles, airport lounge access, and travel insurance.
  2. Cashback Credit Cards: These cards provide a percentage of the amount spent as cashback.
  3. Shopping Credit Cards: These cards offer discounts, reward points, or special privileges at select retail outlets or online marketplaces.
  4. Fuel Credit Cards: These cards provide discounts or cashback on fuel purchases at affiliated petrol stations.
  5. Lifestyle Credit Cards: These cards cater to specific lifestyles, such as dining, entertainment, or luxury, and offer related benefits.

6. How do I apply for a credit card?

You can apply for a credit card through the following methods:
  1. Online Application: Visit the website or App of the bank or credit card issuer and fill out the online application form.
  2. In-person Application: Visit a bank branch and apply for a credit card in person.
  3. Pre-approved Offers: Some banks may offer pre-approved credit cards based on your financial profile. You can follow the provided instructions to apply.

7. What is APR on a credit card?

APR stands for Annual Percentage Rate. It represents the annualized interest rate charged on credit card balances, including any additional fees or charges. The APR helps borrowers understand the overall cost of borrowing on a yearly basis.

8. How does interest work on credit cards?

If you carry a balance on your credit card by not paying the full amount due by the due date, the remaining balance accrues interest. Interest is charged based on the APR and the average daily balance. The interest is added to your outstanding balance, and subsequent billing cycles may also include interest charges if the balance is not paid in full.

9. What is a balance transfer credit card?

A balance transfer credit card allows you to transfer the outstanding balance from one credit card to another, usually at a lower interest rate or promotional rate. This can help you consolidate debt and potentially save on interest charges.

10. What is a good credit score for a credit card?

While credit score requirements may vary between lenders, a good credit score for obtaining a credit card is generally considered to be above 700. A higher credit score increases your chances of approval and may qualify you for better credit card offers with favourable terms and benefits.

11. How does a credit card impact my credit score?

Credit card usage and repayment patterns significantly impact your credit score. Responsible credit card usage, such as making timely payments, keeping credit utilization low, and maintaining a healthy credit history, can positively impact your credit score. Conversely, late payments, high credit utilization, and excessive debt can negatively affect your credit score.

12. Can I have multiple credit cards?

Yes, you can have multiple credit cards based on your creditworthiness and the approval criteria of the respective card issuers. However, it is important to manage your credit cards responsibly, make payments on time, and avoid accumulating excessive debt.

13. What is a credit card statement?

A credit card statement is a monthly summary provided by the credit card issuer that includes details of your transactions, outstanding balance, minimum payment due, payment due date, and other relevant information. It helps you track your spending, review charges, and manage your credit card account.

14. What is a credit card grace period?

A credit card grace period is the period between the statement date and the payment due date when you can pay your credit card balance in full without incurring any interest charges. If you pay the full balance within this period, no interest will be charged on the purchases made during that billing cycle. The typical grace period is between 20 – 60 days.

15. What is the credit utilization ratio?

The credit utilization ratio is the percentage of your available credit that you are currently using. It is calculated by dividing your credit card balance by your credit limit. A lower credit utilization ratio is generally favourable, as it indicates responsible credit card usage and can positively impact your credit score.

16. What are credit card rewards?

Credit card rewards are benefits offered by credit card issuers for using their cards to make purchases. These rewards can include cashback, reward points, travel benefits, discounts, or other incentives. Cardholders can accumulate rewards based on their spending and redeem them for various offerings, such as merchandise, travel, or statement credits.

17. What is a secured credit card?

A secured credit card requires a cash deposit as collateral, which typically becomes your credit limit. It is designed for individuals with limited credit history or a lower credit score. Responsible use of a secured credit card can help establish or rebuild credit.

18. How to withdraw money from a credit card?

Withdrawing money from a credit card is generally done through a cash advance. You can visit an ATM and use your credit card to withdraw cash, similar to a debit card. However, cash advances attract high interest rates and transaction fees, and may not have a grace period before interest is levied, so it is advisable to use this option sparingly and understand the associated costs.

19. What is a credit card's annual fee?

A credit card annual fee is a fee charged by the credit card issuer for the benefits and privileges associated with the card. Not all credit cards have an annual fee, and the amount can vary depending on the card type and the features provided. It is important to review the terms and benefits before applying for a credit card with an annual fee.

20. What is a credit card billing cycle?

A credit card billing cycle is the period between two consecutive statement dates. It represents the timeframe in which your credit card transactions are recorded for billing purposes. It typically ranges from 28 to 31 days, and any transactions made during this period are included in the subsequent credit card statement.

21. How to pay a credit card bill from another credit card?

In general, credit card payments cannot be made directly from another credit card. However, some financial institutions may offer balance transfer facilities where you can transfer the outstanding balance from one credit card to another. It is important to review the terms, fees, and interest rates associated with balance transfers before considering this option.

22. What is a contactless credit card?

A contactless credit card is a payment card that uses Near Field Communication (NFC) technology to enable secure and convenient payments by simply tapping or waving the card near a contactless-enabled payment terminal. It eliminates the need to swipe or insert the card, making transactions faster and more convenient.

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