Credit Card: Definition, Application, Use, and Advantages 

If you are planning to apply for a credit card and want to know about the features and how it works, this article will provide you with the basic required information. Nowadays, credit cards are a very popular financial instrument as they allow you to borrow and spend money in the short term, make purchases on EMI, earn cashback or rewards, etc. Though it sounds very lucrative, everyone should know about how credit cards work and their pros and cons.

What is a Credit card?

It is a card provided by a financial institution that allows you to borrow a limited amount of money that can be used to purchase any item or service. In order to get a credit card, one has to be eligible as per the financial institution’s requirements. Once the card application is approved, you will get the card with a specific limit up to which you can spend for any item or service from the merchants who accept credit card payments.

A credit card is a popular payment method as it gives various offers or cashback to customers. It’s easier to make payments through credit cards, and most merchants accept them. If you are planning to get a credit card, you should know how it works and utilize its benefits.

Difference between Credit and Debit card

With a debit card, you have the ability to use the funds available in your bank account. However, credit cards allow you to borrow funds up to the spending limit and pay them back later.

To get a debit card, you need a bank account. You can apply through net banking or at any branch nearest to you. For a credit card, one has to maintain a good credit score and have a minimum monthly income requirement as per the financial institution. Once they check your credit score and income statements, you will be provided with a fixed spending limit and a card.

How to apply

If you are looking for a credit card, you need to look into a few important pieces of information before you start the application process. There are different cards that offer different rewards, features, and co-brands, and you have to select the cards as per your fit. Also, one has to check all fees related to the card, t&c, etc carefully. Please find the important steps below in order to apply for a credit card:

  • Check your Credit score: A score of 750 or more increases the chances of getting a credit card with more credit limits. If you have a low credit score, you can always consult a financial institution or improve your score for a successful card application.
  • Compare card offers: Check the offers and rewards provided by different cards and select the one that suits your lifestyle and spending. Different cards can offer rewards for your spending on groceries, online shopping, food orders, dining, movie tickets, fuel, travel, etc. A few cards may provide multiple offers on the same card.
  • Fees: Check all fees such as joining fee, annual fee, late fee, cash withdrawal fee, etc. before applying.
  • Submit your application:  You can now apply for a credit card online. You have to provide the necessary details and any required documents to them. You can also apply the same in the branch directly. There are many applications or websites which give you the option to check your eligibility and compare different cards from various banks (e.g., Bankbazaar, Paisabazaar, Indialends, etc).

Document requirements for the credit card application

  • Identity Proof: PAN Card, Aadhaar Card, Passport, Voter’s ID Card, Driving License, etc.
  • Address Proof: Aadhaar Card, Passport, Voter’s ID Card, Driving License, Ration Card, Rent Agreement, Utility Bills, etc.
  • Income Proof: Salary Slips, Bank Statement (Salary Account), Income Tax Return.

How to use

Before using it, you should learn how credit cards work. As per your credit score and monthly income, you will get the credit limit up to which you can borrow funds. If you are using funds from your credit card, you will have to return the money with or without interest, depending on the terms.

You can use funds up to the credit limit given to you and it will reduce once you start using it. The card issuer sends a statement and reminder for any amount due on a monthly basis. Once the due is paid, the credit limit will again increase and be available for use.

Few important steps to follow while using a credit card

  • Check the monthly statement carefully to verify all your spending and any hidden charges.
  • Pay the bill on time, which will help build your credit score.
  • Learn about all the fee and interest calculations related to your card.


Let’s review a few advantages of using a credit card.

  • You can make purchases on credit and also pay them back without any interest within the grace period set by the card issuer.
  • Credit cards are the most accepted payment method for both online and offline transactions.
  • You can earn reward points which can be redeemed to buy items or gift cards etc.
  • Most merchants provide discounts and cashback while using credit card payments. You can also get co-branded cards that give cashback on specific brands or websites for almost all transactions.
  • You can build and improve your credit score by paying your bills on time.
  • Most card issuers also provide death or accidental insurance along with the card.

Though credit cards have many features and advantages, one should be careful while utilizing their credit. Credit cards charge the highest interest among all the credits given by banks. Using the credit line for emergency situations or necessary goods and paying bills on time is always a good habit. On the other hand, if one knows how to utilize it correctly, it can give a lot of rewards or discounts for most of the transactions.

Also read: What exactly is the Cred app and how does it work?

FAQ on Credit Cards

What is the age limit for applying for a credit card?

Credit cards are provided to earning citizens of age 18 or above.

Does applying for a credit card affect cibil score?

Applying for a credit card or loan impacts the credit score negatively. Thus, one should check their credit score before applying for any credit line to avoid any potential rejection and save the hard inquiry on their credit score. Also, one shouldn’t apply for credit cards from various banks at the same time or multiple times to the same bank to save credit score negative impact.

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