What is a Credit Card? - Meaning, Uses & How It Works

What is a Credit Card: Meaning, Uses and How It Works

More than just a payment tool, a credit card offers convenience, rewards, and financial flexibility. It allows you to buy or spend now and pay later, offering more flexibility than paying upfront from your bank account.

If you’re wondering how credit cards work in practice, think of it as a short-term loan. The bank covers your purchase temporarily, and you pay them back later. As long as you clear your dues on time, you can avoid extra charges and even gain some rewards along the way.

How Credit Cards Work

Every credit card comes with a spending limit. This credit limit is the maximum amount you are allowed to use on that card. This limit reduces with every offline or online purchase you make. When you pay back the amount you spent, the credit limit is restored.

Your spending is tracked over a fixed period called the billing cycle. At the end of this the bank sends you a statement listing all transactions. You will also see a total amount due and a minimum amount due.

You can choose to pay just the minimum amount due. However, doing so will incur an interest on the remaining balance. Over time, this interest can increase and accumulate, leading to unnecessary costs. This is why, it’s always prudent to settle your total outstanding balance before the due date.

Common Uses of a Credit Card

Credit cards are accepted widely both online and offline. Some of the most frequent uses include:

Some users also link their cards to subscriptions or wallets for faster transactions.

Credit Card Benefits That Matter

When used well, a credit card offers several real advantages.
Know what are the benefits of credit cards are:

• You earn Cash Points on credit cards spends!
• Get to avail exclusive offers at partner stores & online sites across travel, dining, shopping and more.
• Redeem your Cash Points easily for a range of exciting rewards.
• Simplify payments with features like tap-to-pay, online checkouts, and quick access to funds at any time.
• Choose to convert your spending into EMIs, whether at checkout or post-purchase with flexible tenure options.
• Enjoy the benefits of the interest-free grace period on your purchases, pay in full before the due date and avoid interest on your due amount.
• You can use your credit card to withdraw cash (interest charges are applicable).

Final Thoughts

A credit card can be valuable tool for managing both everyday spending and larger purchases – what truly counts is how you use it. With the right habits, a credit card can be a powerful tool for managing your finances. Staying disciplined with your budget, paying your bills promptly, and leveraging rewards wisely can enhance its benefits while minimising stress. Ultimately, mindful usage and financial awareness are essential to unlocking the full potential of your credit card.

Now that you are familiar with what a credit card is, along with its benefits and uses – are you ready to unlock the full potential of your credit card? Click here to know more about DBS Bank Credit Cards.

Credit Card issuance is subject to approval by DBS Bank India Limited. Terms and conditions apply. The content in this article is intended for general informational purposes only and should not be considered as personalised financial advice.