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Credit Cards



Credit cards are slowly becoming an essential part of our lives. From shopping online in just a few minutes to buying medicines – credit cards have eased our lives in many ways. 


In this module, we will cover the basic things about credit cards that you should know and also answer some common questions and other useful information that will make your credit card user experience smoother and hassle-free. 


What are credit cards?

A credit card is a thin plastic card issued by a financial institution. The card has a pre-approved limit which you can use for purchases. Some credit cards also have a pre-approved cash limit which helps you to withdraw cash through any ATM. The pre-approved limit varies from one person to another and is solely dependent on a person’s credit score and credit history. 

The card can be swiped at physical shops or used online for making purchases. Every month, the card issuer issues a bill and the user needs to make the payment. We have discussed more about this in the section ‘how to use credit cards’.


Difference between credit and debit cards

People often confuse debit cards and credit cards since they are both plastic cards and both are issued by financial institutions. A debit card is linked to your savings and current account and allows usage of the funds in the account. A credit card, on the other hand, is a credit limit issued by the bank, where you can use the money first and pay later. Usage of a credit card involves payment of interest, while usage of a debit card does not. 


Credit Cards:

  • Line of credit that can be accessed with the card
  • Interest have to paid if payment is not done within 30 days
  • Can be used for online purchases and at physical shops
  • Over-usage can lead to going out of budget and falling into debt
  • Have to use PIN or OTP for every transaction

Debit Cards:

  • Tied to your savings or current accounts
  • Can be used for online purchases and at physical shops
  • Can help someone remain in the monthly budget
  • Have to use a PIN for every transaction

Components of a credit card

Now let us see what a credit card looks like. The picture given below represents the front side of the credit card. The four elements as shown here are:


1. The name of the bank/NBFC which has issued the credit card.


2. This is your credit card number


3. This shows the month and year when your credit card expires in DD/MM format


4. This will reflect your name


Now let us see the back of a credit card. There are 3 important sections here:

5. This is the magnetic strip of your credit card. In case you swipe the credit card at a shop, this magnetic strip is from where your card information is taken. Please ensure that this portion is not spoilt when you store the credit card.


6. This is the section for the card holder’s signature. The card is not valid unless it is signed.


7. These 3 digits are called CVV – card verification value. This is the security code of your card and is extremely important. Whenever you make an online transaction, you will have to quote this number. Never share this code with anyone. 

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Advantages and disadvantages of credit cards: 


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Units 1/12