Credit cards have wide acceptance all over India. When they first gained popularity, they were used in large metros like New Delhi and Mumbai. However, they are now accepted in small cities, and Tier 2 and Tier 3 metros have realized their worth in spending on otherwise unaffordable big-ticket items.
The credit card has brought a line of credit and a way to buy essential home appliances to the remotest areas of India, scaling up the standard of living of people who earn low to average salaries. A credit card is a small plastic card that can be used to purchase goods and services on credit. From the date of the first purchase, credit card holders get a 45-day line of credit after which a bill is generated. Credit cards come in categories according to how you wish to use them, and your main purpose for them.
There are specific credit cards for low-salaried groups and housewives, as well as for small-business owners and high-salaried professionals. The best credit cards in India are issued by banks and finance companies. With credit cards come charges and fees. There will be a joining fee and charges when you use a credit card to get cash from an ATM. There may be interest charges when you spend with your credit card and purchase goods on EMIs. A kind of credit card that does not charge interest, either for a specific period, or a purchase, is called an interest-free credit card.
Interest and Credit Cards
If you thought that nothing comes for free, you’re right. There is no such thing as a credit card with zero interest. Charging interest is one of the ways that banks and other issuing authorities earn from credit card use.
When it comes to credit cards, 0% APR means that you don’t have to pay interest on certain transactions made through your credit card. In a nutshell, a 0% interest or interest-free credit card applies to new credit cards as an introductory offer, and lasts for a particular period, according to various issuing authorities. For instance, on a new credit card offering an interest-free period of 12 months, you won’t be charged interest for products bought in the first year of credit card use. After this, interest can kick in when you buy products on EMIs, or don’t pay timely credit card bills.
How is Interest Charged?
It’s vital to remember that the interest-free period isn’t permanent. Almost always, the best credit cards in India don’t include zero percent interest on balance transfers, and only for new spends via the credit card. Another way that an interest-free credit card works is in terms of its use. When you purchase something, you get an interest-free period of 45 to 55 days from the first day of your purchase, at the end of which you will have to pay the bill. This period is actually your line of credit. If you default on your bill payment, you will have to pay an amount of interest from the date you default till you make the final payment. This may amount to 2.5% – 3.5% of your transaction amount.
Interest on credit cards is also charged when you buy products on EMIs, and you may have to pay some additional amount with each EMI payment. Sometimes, depending on the brand of the product you bought and the credit card used, you may get offers of “no-cost EMIs” which means you won’t pay additional interest. A zero percent interest offer can be made good use of, even if it’s for an introductory temporary duration. You can use this facility to make large purchases on EMIs without interest.
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