Credit Card basics - All terms explained

  Confused by all the credit card terminology? Here's a quick guide :

Credit Limit

This is the maximum amount of money which you will be able to spend using your card before you have to pay your bills. Once you pay your bills, the limit will again be available for expenses. If the bank sees a good transaction history and timely re-payment, they will be happy to increase this limit for you.

Joining Fee

The one-time payment you will make to get your card. A lot of entry-level cards have zero joining fee

Annual Fee

The amount the card company will charge you each year to avail their credit card service. This is usually billed and paid in one payment at the start of the year. A lot of cards also have a lower fee for the first year than the rest of the years. This is done to make the card more attractive upfront. Be sure to check the fee from 2nd year onwards.

APR - Annual Percentage Rate

This is the percentage at which you are charged interest in case of late payments. This is expressed in per annum basis and usually lies between 30% to 45% - depending a lot on your CIBIL / Credit score. Do note that even a 30% APR is quite high and you should always pay on time to avoid this cost. There is also the cost of GST currently levied at 18% on the interest amount.

Cash Advance Fee

You are allowed to use your credit card at ATM machines to withdraw cash in case you need it. However there is almost always a fee associated with it. This is expressed as a percentage of total cash withdrawn (usually around 2–3%) and there is also a min charge of around 200 Rs every time you withdraw cash + 18% GST on the Cash advance fee.

Interest-Free (Grace) Period 

This is the maximum time period you can enjoy credit without any fee or interest levied on it. Its usually your billing cycle duration (say 45 days ) + a 6/7 day grace period. If you made a purchase on the 1st day of your billing cycle, and your grace period is 45+7 = 52 days, then you must pay the card company before 52 days. If you made a purchase on the 20th day of your cycle, then you must pay in 52–20 = 32 days to avoid being charged an interest (APR)

There are of-course plenty of banks offering Credit Cards. Do remember when you apply for one, to be prepared to wait 2–3 weeks, because most Banks rely on a lot of paperwork to process your application. They will ask you to submit physical copies of documents, then you wait for the physical card to arrive by courier and then the Pin arrives separately. Its a very old process and they haven't fully adapted to technology.

This is why we created PaySay. PaySay gives you a credit card in just 5 minutes. PaySay is faster, secure and doesn't need to be swiped anywhere. Just Tap and Pay. Sign up now to get an Instant Credit limit of Rs. 10,000 Apply Here