Credit Cards are widely used for everyday spending, online shopping, and managing short-term finances. However, many users apply for a card without fully understanding the terminology associated with it. Whether you already own a card or are planning to get one from a leading provider like an HDFC Credit Card, knowing these common terms can help you use your card more responsibly.
Credit limit
The credit limit is the maximum amount you can spend using your credit card at any given time. This limit is decided by the bank based on your income, credit score, and repayment history. Exceeding the credit limit may attract additional fees.
Billing cycle
The billing cycle is the period during which your card transactions are recorded. It typically lasts 30 days. At the end of each billing cycle, the bank generates a statement listing all purchases, payments, and charges. Understanding your billing cycle helps you plan expenses and repayments more effectively.
Statement due date
The statement due date is the last date by which you must pay at least the minimum amount due. Paying before the due date helps you avoid late payment fees and protects your credit score. Many users set reminders or auto-debit instructions to ensure timely payments.
Minimum amount due
This is the smallest amount you must pay by the due date to keep your account in good standing. While paying only the minimum amount avoids late fees, interest will be charged on the remaining balance.
Interest rate (APR)
The APR is the interest charged on unpaid balances. If you do not clear your total outstanding amount by the due date, interest is calculated on the remaining balance. Credit Card interest rates are generally higher than other types of Loans, making timely repayment essential.
Interest-free period
Most Credit Cards offer an interest-free period ranging from 20 to 50 days. During this time, you can make purchases without paying interest, provided you clear the total bill by the due date. This can help manage short-term cash flow efficiently.
Reward points and cashback
Many cards offer rewards for spending, such as reward points or cashback. These benefits vary by card and spending category. Accumulated rewards can be redeemed for vouchers, products, or statement credits.
Late payment charges
If you miss the payment due date or pay less than the minimum amount due, the bank may levy late payment charges. Repeated late payments can also affect your credit score, making future credit approvals difficult.
Credit score impact
Your credit card usage directly affects your credit score. Timely payments, low credit utilisation, and responsible usage strengthen your credit profile. This becomes especially important if you plan to apply for HDFC bank’s Credit Cards for higher limits or additional financial products in the future.
Conclusion:
Understanding common credit card terms empowers you to make better financial decisions and avoid costly mistakes. Being familiar with these terms ensures smarter usage, improved financial discipline, and long-term credit health.
