Credit Card FAQs

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.