Back in the 1970s, people in India would have never imagined their lives would be made so simple all through a small rectangular plastic card. Then, Central Bank of India, launched its first credit card in 1980, followed by Andhra Bank later in the same year.

Fast forward 45 years, and credit cards have become a mainstream choice, backed by a massive user base and playing a key role among today’s many financial planning tools. With a wide range of credit cards at your disposal, it becomes difficult to distinguish between their usage and requirements.

In this blog, let’s dive into the five different credit card categories in India and their usage for Indian citizens.

Before getting into this, let’s first understand the meaning of credit cards.

What are credit cards?

Credit cards are financial credit facilities that allow customers to borrow funds from a bank or financial institution to make purchases.

These credit cards provide you with financial credit up to a certain credit limit that is supposed to be repaid later. Along with convenience in usage, credit cards also give security, reward points, and an opportunity to build your credit score.

Let us understand the key features of some of the most popular types of credit cards in India and also look at some credit card benefits comparison.

The 5 different credit card options in India

1.  Reward Credit Cards

A credit card with perks that allow users to collect and redeem rewards is called a rewards credit card. These are preferred by users who want to earn reward points on their expenses. Officially, most credit cards provide rewards. Therefore, this is often a feature that is present in all credit cards.

A rewards credit card works by giving its users a fixed percentage of rewards on their purchase value. For example, you may get 5 points per ₹500 spent on your credit card.

• Depending on the issuing bank, these reward credit cards let you benefit from earning points, cashback, and gift vouchers through your transactions.
• Usually, there is no expiration date for these reward points.
• There is typically a joining fee and an annual renewal fee.
• There may also be complimentary lounge access across airports.

Some of the reward credit cards in India include:

• IDFC First Classic Credit Card is a lifetime free credit card, therefore has zero joining or annual fees.
• SBI SimplyCLICK Credit Card has a joining fee of ₹499+ taxes and an annual renewal fee of ₹499+ taxes.

2.  Travel Credit Cards:

Travel credit cards are ideal for recurrent travelers who can benefit from saving on travel. These cards help you earn rewards that can be used on airfare, hotels, accommodations, and more to make your travel experience smoother.

For people who travel often, these cards can prove to be a useful tool with their discounts, offers, and other rewards. For example, airline credit cards may pay you in ‘miles’ for ticket bookings made through these cards. These can be then redeemed on any future airline bookings.

• These cards will come with unlimited complimentary airport lounge access.
• They let you earn points or miles on your travel with specific airlines.
• If the credit card is partnered with a specific hotel, they allow for discounted room rates, loyalty points, room upgrades, etc.
• In most cases, these credit cards do not levy a foreign transaction fee.

Some of the travel-oriented credit cards in India include:

• MakeMyTrip ICICI Bank Credit card has a joining and annual fee of ₹999+ taxes.

• Axis Bank Miles and more Credit card has a joining and annual fee of ₹3500+taxes.

3.   Lifestyle credit cards:

Lifestyle credit cards are designed for individuals who enjoy and tend to enhance their dining, entertainment and lifestyle experiences. These cards unlock discounts, vouchers and rewards for users who indulge in regular lifestyle expenditures.

• These lifestyle credit cards often come with exclusive welcome offers, such as gift vouchers, premium club memberships, and more.
• Typically, these cards also yield reward points on your transactions that can be redeemed in restaurants, hotels, entertainment, etc.
• These cards also enhance the shopping experience, by offering exclusive discounts on transactions using the card.

Let’s look at some lifestyle credit cards available in India:

• Kotak Infinite Credit Card has no joining or annual fees. But please note that this is an ‘invite-only’ credit card.
• HDFC Regalia Gold Credit Card comes with a joining and annual fee of ₹2500+applicable taxes.

4.   Secured credit cards:

Secured credit cards are used by individuals with low credit scores as a tool to build their credibility. In general, they work just like a typical credit card. However, you may need to pay an upfront cash deposit to avail an equivalent line of credit. For example, you may need to pay ₹10,000 deposit to get a line of credit for the same amount, ₹10,000.

This deposit is essential for the issuing banks, as it serves as a margin of safety in case the user misses their scheduled payment.

• These secured credit cards are usually issued against corresponding fixed deposits.
• Typically, the credit limit is 90-100% of the deposit amount.
• They usually do not have a joining or annual fee.
• The card also provides rewards and cashback like other credit cards.

Some of the secured credit cards available in India include:

• Paisabazaar Step UP Credit Card by SBM Bank has no joining or annual fees above ₹5000 fixed deposit amount.
• SBI Unnati Credit Card is free for the initial four years and then charges ₹499 fifth year onward.

5.   Business credit cards:

These business credit cards are ideal for business-related expenses. These are used to help the business entities manage their finances. Simply put, business credit cards are revolving lines of credit that help businesses make payments for their work, even when the cash flows are uneven. These cards usually come with a higher credit limit and expense tracking.

These cards may offer higher credit limits to accommodate substantial business-oriented expenses. The rewards are focused on company-related expenditures, including office supplies, advertising, and business travel.

• These cards tend to provide extensive credit limits to accommodate substantial business expenses.
• The rewards are usually around the company or business-related expenses such as office supplies, advertising expenses, business travel, etc.
• Generally, these cards also offer quick loan features for businesses depending upon their financial credibility.
• These are efficient tools for tracking employee expenses and the organisation’s spending patterns.
• Eligibility usually depends on the financial history and the creditworthiness of the business.

Some of the business credit cards in India are:

• Yes Prosperity Business Credit Card: Which comes with a joining fee and annual renewal fee of ₹499+taxes.
• SBI Platinum Corporate Credit Card: This does not have a joining or annual fee.

Final word: How to choose from diverse types of credit cards in India

Credit cards are structured tools for financing an individual or business’s expenses. However, with plenty of adequate options available, you are bound to get confused. To choose the right credit card for you, it’s best to set your financial goals and both short and long-term requirements.

Based on your goals and research, choose the credit card that perfectly aligns with it!