Credit cards are instruments issued by banks. Credit cards provide the facility to purchase goods or services through credit.
Credit cards are issued with some pre-specified limit of payment and the time period up to which you can utilise the limit.
If you do not repay the outstanding amount within the stipulated specified time you would be charged with interest on the amount outstanding on your credit card.
It means that people are spending more on credit cards.
This shows the increasing digitisation in India. i.e. consumers are now more confident in making digital payments rather than making cash payments.
As the amount of spending on credit cards is increasing, it has now become essential to know about the various types of credit cards available in India so that you could choose the best one from the available cards as per your requirements.
Types of credit cards
1. Business credit cards
Business credit cards are issued by banks to business houses or even small businesses so as to provide the facility of making business payments through credit cards.
Big corporate generally issues, business credit cards to their employees so that hassle-free payments for expenditures relating to business, like travel, accommodation, etc could be done by the employees.
Business credit cards eliminate the need of submitting bills for reimbursement by the company.
Example
If Mr. “A” working in a big corporate house needs to travel from Bangalore (his place of work) to Delhi (the branch office of his company) for some business purposes.
During the visit, he would need to do expenditures for business purposes and he may also incur expenditures for personal leisure or shopping.
After the completion of his visit, he would be required to submit the bills relating to the business expenses for reimbursement by the office.
This might be a time-consuming task for both Mr. “A” and his employer.
But if he would be given the business credit card, there would be no need to submit the bills for reimbursement, as the credit card statement would mention the type of expenditure and the place at which it was done by Mr. “A”.
It would be easier to find out personal expenditures and official expenditures.
So, a business credit card removes the financial hassle and is convenient for businesses.
Business credit cards are also beneficial even if you are a small businessman.
Business credit cards help you in separating business expenses from personal expenses.
An individual is required to do expenditures both for business purposes and personal purposes.
You would be required to do some extra brainstorming to bifurcate expenditures that were done for business purposes and those that were done for personal purposes by writing them separately.
It might be possible that you might either forget the expenditure or you might write down the wrong amount.
A business credit card provides you the ease of maintaining and bifurcating such expenditures.
Business expenditures are allowed as a deduction for income tax purposes but personal expenditures are not allowed as a deduction. Therefore it becomes necessary to separate the business expenses from the personal expenses.
Business credit cards also provide a lot of benefits in terms of cashback, rewards, gift vouchers, etc.
2.Cash-back credit cards
When you do any transaction by cash back credit card certain percentage of the amount expended by you is returned to your account. This is called cashback.
Every time you do any expenditure for traveling, dining, purchases, movies, etc, these credit cards offer cash back at a certain percentage, which might be up to 25% or so of the expenditure.
These cash-back offers are provided on the basis of brand tie-ups with banks.
3.Co-branded credit cards
These credit cards are issued by banks in collaboration with other brands.
Co-branded credit cards provide benefits and offers from both banks as well as the associated brand.
For example, the IRCTC SBI platinum credit card provides special privileges while booking IRCTC services.
4.Contactless credit cards
While making a payment through a normal basic credit card, you need to insert the credit card into a Point of Sale (POS) machine at the store and enter the PIN,
But as the name suggests, contactless credit cards are neither required to be inserted into a POS machine nor a PIN is required to be entered for making payments for goods or services.
These credit cards are based on a unique technology through which you are just required to tap the card on the POS machine to make the payment without entering any PIN.
These credit cards are secure too.
5.Credit cards for women
These credit cards are issued with the intent to maximise the benefits for female customers.
These credit cards are mainly focused on shopping, rewards, and cash-back offers.
The specific reason behind proving such benefits might be the fact that woman customers are more considered to be attracted to shopping, cashback, and rewards.
6.Entertainment credit cards
Entertainment credit cards are specifically designed to provide extra benefits to you when you incur expenditures for your entertainment, such as expenditures for games, movies, traveling, dining, etc.
The rewards might be in the form of cashback or points which might be redeemed for future purchases.
7.Fuel credit cards
Fuel credit cards are beneficial for you while you re-fuel your vehicle.
These credit cards provide extra benefits in terms of cashback, waiver of surcharge on fuel, reward points, etc.
The accumulated reward point might be used for further re-fuelling the vehicle, some dining, or other benefits.
These credit cards also provide some specific benefits when they are used at a specific petrol pump which has a tie-up with the issuing bank.
The BPCL SBI credit card provides extra benefits when it is used for payment at BPCL petrol pumps.
8.Gold credit cards
Gold rate cards are issued to individuals with a good credit scores.
These credit cards are best suited for individuals under higher income segments as per issuing bank norms. i.e. banks specifically mention the range of income for which the gold rate cards can be issued to the customer.
These credit cards provide a higher limit for withdrawal, welcome benefits in terms of reward points, airport lounge access, insurance, contactless payment facility, etc.
9.Lifestyle credit cards
Every person has a different way of enjoying life.
Lifestyle depends upon your thought process as well as your income.
These credit cards offer different privileges according to the changing needs and lifestyles of customers.
Some people like traveling, others might like dining at the restaurant of their choice, etc.
The benefits offered by these cars might include dining privileges, cash backs on travel bookings, discounts on expenditure at health and wellness centers, privileged airport lounge access, discount on ticket bookings, savings on re-fueling vehicles, etc.
10.Platinum credit cards
These are among the elite credit cards with slightly higher joining fees and annual fees.
These cards provide some extra benefits in comparison to basic rate cards.
The holders of these cards are offered extra deals, offers, and privileges.
11.Signature credit cards
These are the premium cards issued by the banks only to certain customers who meet up the specific criteria as per the issuing bank standards.
These credit cards are best suited for individuals under higher income groups.
Higher joining as annual fees is there for these cards.
Higher reward points and privileges are offered to the card holders like unlimited access to international and national airport lounges, insurance coverage for air accidents, etc.
12.Silver credit cards
These credit cards are generally offered to the customers in average salary segment.
A good credit score is required to get these credit cards.
These cards have low membership fees and are suited for everyone who wants to feel the privilege of holding a credit card.
13.Titanium credit cards
Almost all banks offer titanium credit cards to their premium customers.
These credit cards offer a truckload of benefits in the form of cash-back offers, credit periods without payment of interest, insurance to the card holders, gift vouchers from retail brands, lifestyle offers, fitness and wellness benefits, etc.
14.Travel credit cards
These credit cards offer special privileges for frequent travelers.
The bank issuing travel credit cards have tie-ups with hotels, airlines, and travel companies not only in India but also abroad.
The loyalty programs and benefits provided by these credit cards depend upon the type of travel you are doing frequently, like if you are a frequent flyer, the benefits provided to you by the credit card issuer would be different from those who are using the card for travel by train.
The benefits include airport lounge, access, reward points on each travel, which could be could be used for getting a discount during the next travel, extra luggage allowance, etc.
Conclusion
The decision of accepting a credit card varies from person to person. All banks issue almost all types of cards mentioned above.
Before accepting a credit card you should be clear about your requirements and the reasons why you want a credit card.
A clear answer to this “Why” might help in taking the right decision when choosing a credit card.
Do not fall prey to the whims & fancies of credit cards because credit cards on the one hand are the tools to manage finances and on the other hand they are also the tools to destroy wealth.