It’s a busy Tuesday morning, and you receive a call: “Hello sir, I’m calling from ABC Bank. You are eligible for a credit card in your name. Would you like to apply?” You might feel tempted. Even if you already hold a credit card, what’s the harm in having another? A credit card can act as a ticket—your gateway to instant credit, accessible even when you are short on cash.
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Before you say ‘yes’, it’s important to pause and consider: what kind of credit card is this? How will it actually benefit you? To answer these questions, you need to understand the different types of credit cards available in India so you can make an informed decision and choose the one that best suits your needs.
1) Regular credit cards
Let’s start with regular credit cards. These credit cards are designed for people using a credit card for the first time or who only need basic credit for daily use. Regular credit cards offer limited benefits, such as earning reward points when shopping.
One of the main characteristics of basic credit cards is that they have very low or no yearly fees. They are easy to get if you have a job and a steady income. The credit limit is also simple—not too high, not too low—and typically starts at ₹5000 and goes up to ₹50,000.
With regular credit cards, you generally have 20 to 50 days to pay your bill without interest. You can convert your large payment dues into easy monthly instalments (EMI) and withdraw money from the ATM, with extra charges if you need it in an emergency.
The main drawback of these credit cards is that they usually come with limited benefits. The reward points are often minimal, and there are no other exciting features, such as airport lounge access.
They are simple and easy to understand and get for first-time credit card users.
2) Premium credit cards
As their name suggests, premium credit cards are designed for premium users who seek luxurious benefits. They are typically targeted at individuals within a specific income bracket, who have both income and particular spending habits.
Premium credit cards come with exciting features, including higher reward points on purchases, multiple free airport lounge accesses, lucrative joining benefits, luxury travel deals from top brands, and personal concierge services. However, these exclusive services come with a hefty price. They generally offer a higher credit limit than regular credit cards.
Premium credit cards often charge a higher annual fee.
3) Rewards credit cards
Rewards credit cards are generally defined as any credit card that offers rewards for every rupee you spend. Depending on the card, the rewards can come in the form of reward points, miles, cashback, or air miles.
There are several subtypes of rewards credit cards:
a. Reward point credit card
b. Cashback credit card
c. Travel points credit card
The rewards can be redeemed in various ways. Some cards offer the option to redeem points to pay your credit card bill, while others provide air miles that can be used to purchase flight tickets. Additionally, some cards allow you to redeem points for select items from a catalogue. This means using these types of credit cards for your daily purchases helps to fund your next trip, vacation, or new items.
Annual fees of these cards vary widely.
a) Reward point credit card
Many credit cards offer rewards in the form of points. For every rupee you spend, you earn a fixed number of reward points.
For instance, the HDFC Diners Club Privilege Card offers a base reward rate of 2.7% on spending across categories like shopping, travel, and entertainment. The reward point conversion rate is 1 RP = ₹0.50.
Additionally, many rewards credit cards offer annual fee waivers from the second year onwards, provided you meet a minimum annual spend requirement. For the HDFC Diners Club Privilege Card, the annual fee is waived if you spend ₹3,00,000 in a year.
How can you redeem your reward points?
Card issuers typically provide a variety of redemption options through their rewards portal. You can use your points to purchase items, book travel, or avail of vouchers directly from the issuer’s website.
b) Cashback credit cards
Cashback credit cards are one of the simplest ways to earn rewards. You receive a small percentage of the amount spent on purchases made with the credit card as cashback.
Key features of cashback credit cards include:
- a) Flat cashback rates or higher cashback on selected categories (e.g., 10% on dining, 5% on fuel)
- b) Monthly or quarterly cashback limits, which may be waived for high spenders or premium cardholders
Cashback rewards are typically redeemed as a statement credit, which means the cashback amount is applied directly to your credit card balance, reducing the total owed.
Cashback cards are popular because they offer straightforward rewards, reliable returns, and wide acceptance, making them ideal for consumers looking to get value from everyday spending.
c) Air miles credit cards
An air miles credit card is designed for frequent travellers who regularly use airlines. These cards enable users to earn rewards based on their spending, which can be redeemed for flight tickets. Card issuers often provide complimentary air miles for purchases in select categories, especially travel-related expenses. While high-end credit cards typically offer air miles, co-branded travel credit cards usually provide greater benefits.
Users earn air miles that can be converted and transferred to a chosen airline’s frequent flyer programme. Additionally, these cards come with perks like priority check-in and free airport lounge access, enhancing the travel experience.
4) Fuel credit cards
Fuel credit cards address the specific needs of vehicle owners.
Fuel credit cards are made for people who spend money on fuel for their vehicles. These cards give special benefits when you buy petrol or diesel, for instance:
- Cashback on fuel purchases
- No extra charge (surcharge waiver) when you pay for fuel at certain petrol stations
Welcome bonuses when you first get the card - Automatic balance top-up so you don’t run out of money on the card
- Renewal offers when it’s time to renew the car.
Typically, these cards can give you back up to 13% of what you spend on fuel, but there is a limit on how much cashback you can get each month. Many fuel cards also give rewards for other things like eating out, travel deals, and shopping, so they are useful for more than just fuel.
5) Co-branded credit cards
Co-branded credit cards in India are created through partnerships between banks and well-known brands in sectors like travel, retail, e-commerce, entertainment, and fuel. These cards reward customers with special points, cashback, and discounts tied specifically to those brands.
Typical benefits in co-branded credit cards include:
- Faster earning of reward points or cashback when you shop with partner brands
- Priority access to sales or special offers
- Free tickets or premium services related to the partner brand
Annual fees vary widely. Some cards have no fees for life, and others charge up to ₹4,999 per year, with fees often waived if you spend a set amount.
What type of credit card should you get?
Choose your credit card based on your spending habits, income, and financial goals.
- If you are new to credit cards or want simple, low-cost access, go for a lifetime free credit card or a low annual fee.
- If you travel often, especially internationally, a travel credit card that offers air miles and benefits will save you money on fees and provide useful perks like lounge access.
- If you shop frequently, especially online or at partner stores, a co-branded credit card will maximise your rewards and discounts.
- To earn money back on all your purchases, choose a cashback credit card with clear, simple cashback rates.
- If you want premium services and exclusive benefits, a premium or lifestyle credit card fits that need.
Match the card’s features to your income level and spending style. Avoid cards with high fees and rewards that don’t align with your habits. Make an informed decision.
Conclusion
Before saying yes to any credit card offer, know exactly what kind of card it is. Understand its features, costs, and benefits clearly. Each credit card type serves a specific purpose and suits different spending patterns. Choose based on your income and lifestyle to get maximum benefit and avoid wasted expenses. Use this knowledge to pick the card that fits your needs and keeps your finances efficient and under control.
