Credit Cards

These cards are issued by banks or financial institutions to customers using which they can make purchases or withdraw money in advance for a credit. The credit limit offered to the individuals may vary between person to person based on their spending capability. The total transaction amount can be paid in full (Payment Due) or partial (Minimum Payment Due) once the bill is received for the month. Usually customers get certain period (~20 days) to pay the due as a grace period and if the due is not paid within the grace period, certain fee and interest would be added to the due amount.

Once the application is received from a customer, the banks screen the application and arrive at a credit score. The credit limit and the card product which is offered to the customer will be determined based on the credit score. Normally the applications are forwarded to a Credit Information Company (CIC) which screens the application to arrive at the credit score. For example,

- CIBIL - Credit Information Bureau (India) Limited

- Equifax

- Experian
- TransUnion
- ICS - Iran Credit Scoring
- Creditinfo

There are different types of credit cards based on the features like a Co-branded card or an Affinity card. The option of paying the minimum due introduces us the concept of Revolving Credit. Loyalty points can be accrued for every transaction and the same can be redeemed to get Gift Vouchers, Air miles, Gifts, etc.

Features:

·         Can make a purchase even when the customer’s bank account is out of balance

·         Buy now and pay later

·         Option to pay a minimum amount as due

·         Rewards on every transaction (Loyalty)

·         Balance transfer

Note:  The concepts of applying for a credit card, credit scoring, printing of cards, revolving credit, different types of credit cards, loyalty and fee related to transactions will be explained in upcoming posts.