The Ultimate Guide to Understanding Credit Cards

Credit Cards GuideCredit Cards are inherently not a very simple product. While many bankers may disagree, but most consumers would nod their heads in agreement. Many of us have had surprises with our credit cards – some pleasant, usually unpleasant. So we at FS Desk decided to work on the most comprehensive guide to credit cards ever written.

The Ultimate Credit Cards Guide

Understanding Credit Cards

  • How does a Credit Card Work – Learn the very basics of a Credit Card. What are the specific jargons that you should be aware of and how the credit is extended to card holders
  • How do Credit Card Companies make money – If credit card companies lend their own money to us and we just pay it back in time, without incurring any fees, then how do the Credit Card companies make money. Understand this and you would also learn how to use your card smartly.
  • What is a Pre-paid Credit Card – A new type of card that give you the flexibility and convenience of plastic money without the risks of a very high limit induced overspend.
  • Debit vs Credit Card Difference – How are credit cards different from debit cards? Which one would you pull out when paying for a purchase.
  • What are Smart Credit Cards, Chip based cards, EMV Cards – Credit cards have gone smarter and they say the chip is what makes it so. Really? read on to understand the world of smart cards.
  • Student Credit Cards – Can students get a credit card? They sure need one. Understand what are Student Credit cards and their availability in India.

Credit Card Usage

  • Reading and interpreting a Credit Card Statement – Credit Card statement is one of the most mis-understood communication between the card company and the consumer. De-code the card statement and stay a happy Credit card user.
  • Billing Date and Pay-by-Date in a Credit Card – Understand the difference between the billing date and pay-by-date in a Credit Card
  • Reward points Vs Cash back in a Credit Card – Most cards offer reward points, some offer cash back. Which makes more sense. Why?
  • Choosing between Cash Back and Discount offers on Credit Cards – While comparing shopping offers on your credit card, would you choose a spot discount or a money back offer? Is that a prudent choice?
  • Should you withdraw money from a Credit Card – Learn why you should avoid withdrawing money from your Credit Card account
  • Credit Card debt, and Credit Card Balance Transfer – Do you have outstanding balance in your card? Can you transfer it to a card with a lower charge or avail of some balance transfer offer?
  • 4 quick ways to improve Credit Score if you use a Credit Card
  • 5 tips to increase your credit card limit – do you feel the need for a higher credit limit on your card? read our simple guide for the same.

Understanding Your Credit Card Statement

Any credit card statement generally entails information regarding transactions made during the month, the amount you need to pay, any interest due on the outstanding balance and the minimum payment.


Understanding a credit card statement can be a fuss at times due to the unusual jargon and requisites. And to be a responsible credit card user, you need to comprehend all the terms and numbers carefully given on the statement. It will not only save you from more credit card debt but will also help you to control your cash flow. Some of the important things that should be observed while going through a credit card statement are mentioned as under.

  • Statement date – It is the date on which the bill has been generated. It is used in calculating the interest amount if you fail to pay the full outstanding amount by the payment due date, even if the due date may fall weeks after the statement date.
  • Credit limit – It is the maximum amount that the credit card company has approved for you to borrow. It is generally based on your income and your payment track record. You may be interested in reading about how to increase your Credit Limit.
  • Available credit limit – It is the difference between your credit limit and the amount you are indebted with. The available credit limit is the unused credit line still available on your card as on the date of the statement generation. This might change if you do more transactions on your Credit card after the statement date. Most banks closely track the credit utilization to understand the credit needs of their end customers.
  • Cash advance/cash limit – Credit card also facilitates you to withdraw cash from ATMs which is not counted on your credit limit. It is called cash advance or cash limit. Please do note that cash withdrawal using a Credit Card involves interest charges and hence should be avoided as far as possible. Try withdrawing from your debit account which will have no interest charges.
  • Total amount due /Outstanding balance – It is the total amount that you owe to the credit card company. It is a cumulative amount including interest or other charges like overdrawn fee, late fee, etc. This amount includes the pending amount from any previous billing cycles and the possible interest charges/fines due to past payments which were not done in full.
  • Minimum payment – The credit card company fixes a minimum amount that you are required to pay every month. It is usually 5%-20% of the total indebted amount. In case you fail to pay the minimum amount due, it is considered as default and a late payment fee will be charged. However, if you pay the minimum amount, the remaining unpaid amount is carried forward to the next billing cycle and likewise, under revolving credit facility. It is always recommended to pay off your debts as soon as possible but in case, you can’t settle the total amount due, it is best to pay the minimum amount every month.
  • Payment due date – It is the date by which your credit card company must receive the minimum payment. In case you miss this date, you would typically be asked to pay a late-payment charge. It also results in a potential drop in the Credit Rating/ profile of the credit card holder. Hence its a good idea to pay before the Payment Due Date. If paying by cheque, please keep a buffer of 2/3 days to allow for potential cheque deposit, collection or clearing delays.
  • APR (Annual Percentage Rate) – It is the rate of interest as per which your debt will be charged.
  • Interest rates – The interest rates levied can differ for different types of borrowing. For instance, the rate of interest can be different for making purchases and withdrawing money from ATMs.
  • Transaction details – Every purchase and payment made on credit card will be recorded under transaction details. In fact, any other charged levied by the credit card company like interest, annual fee and late fee will also be mentioned here. It is important to check these details thoroughly.
  • Reward points – It is the record of points earned till date. It has detailed summary of opening balance, points redeemed and balance points. You can redeem the accumulated points as per your requirement. Every credit card company has a different method of redemption.

On a concluding note, it is always good to check your credit card statement carefully lest you get charged mistakenly. It is a useful reminder of terms & conditions, interest rates, minimum payment required and the due date. So, do check your credit card statement next your receive it and manage your funds better.