A credit card is a rectangular piece of plastic carries certain identifying information about the user and has monetary value attached to it. It contains a magnetic strip on the back or a chip. On the face of it there will be an account number and the owner’s name along with some other details about the issuer.
Credit cards are actually pre-approved loans or overdraft facilities provided to the holder for use. Credit card represents a type of financial account. By using credit cards, customers can offer a bank’s money instead of their own to pay for a product or service today, and over time, they repay the bank.
The account associated with a credit card is like a running overdraft account that the user uses to pay his utility bills or purchases at the outlets and then keeps repaying as the end of the month or credit cycle to reuse the card and the limit.
Any individual who is and adult and has steady income to show can avail the credit card facilities form the banks. Generally, banks are not hesitant to issue credit card to anyone who can show source of income. Even pensioners are able to get credit card.
It is all utility purpose loan and the loan amount can be used for any purpose. The banks are not interested to know what the borrower is going to do with the loan amount but in general the card is used for daily purchases and for paying bills.
Maximum Amount or Card Limit :
The credit card limit is arrived at by calculating the average monthly income of the applicant. It is generally a multiple factor of monthly income (X times the income) and Banks consider their own parameters to enhance or to reduce the limit. CIBIL plays a vital role for issuance of credit card.
There is no security required for credit card. It is an unsecured loan facility from the Banks.
Frequently Asked Questions :
Unlike debit cards, credit cards have a limit that can be utilized by the card holder. The limit is fixed while issuing the card and is in the form of running overdraft account. Meaning you use the limit and pay back the money to banks with interest when you get your income or salary and again reuse the limit when you need money.