What Is a Credit Card and How Does It Work?

By OneCard   |   November 22, 2023

    Sharing is caring 😉

Credit cards have reshaped the way people pay for their expenses. They help make aspirational purchases affordable and make managing day to day expenses easy.

If you are new to credit cards, this blog will tell you more about the different aspects of this amazing financial tool, how it works, and its benefits.

What Is a Credit Card?

A credit card is a payment card issued by a financial institution that allows you to get instant funds for making purchases. You can repay the amount later after a specified number of days.

In addition to conventional credit cards, new age credit cards like OneCard, also provide add on features like metal credit cards and advanced apps to manage the credit card.

Why Does One Need a Credit Card

The uses of a credit card are countless, making it a convenient and flexible payment option. Some of the popular ways people use credit cards include:

  • Making purchases effortlessly: This is one of the primary uses of credit cards. Whether shopping in stores or online, credit cards allow purchases without cash.

  • Added security: Credit cards provide added security compared to cash. Cards can be quickly blocked if lost or stolen to prevent unauthorised transactions. Many cards offer fraud protection as well.

  • Secure online payments: Credit cards are a secure payment method for online purchases. Some cards, like OneCard, offer mobile apps that have advanced controls to manage transaction limits, and allows users be in complete control of their expenses.

  • Building credit history: Using a credit card responsibly can help establish a good credit score. Make timely payments and keep a low credit utilisation ratio to build a high credit score.

  • Rewards and incentives: Many credit cards provide reward points, and other perks that can be redeemed for travel, discounts, or merchandise. OneCard offers 5X rewards on top two spending categories, instant credit of reward points, and seamless redemption options.

OneCard offers additional benefits, like its exquisitely crafted metal card design which enhances the user experience, providing a sense of luxury and prestige. Moreover, the OneCard onboarding process offers hassle-free card activation right from its app.

Lifetime Free Metal Credit Card

How to Use a Credit Card?

  • Choose the right card: Select a credit card that meets your spending needs and financial goals. Consider factors like interest rates, annual fees, rewards programs and benefits.

  • Read the terms and conditions: Carefully review the credit card’s terms and conditions to understand the associated interest rates and fees. OneCard has no joining fees, and offers a lifetime free credit card.

  • Make purchases: Once you activate your credit card, you can use it to make payments at stores and for online transactions.

  • Track your spending: Review credit card statements by monitoring your card transactions against your budget. In addition to this, OneCard offers you visual analysis where you can track your category-wise spends.

  • Pay your bills on time: Making timely payments is crucial to build and maintain good credit history. Set up automatic payments or reminders.

  • Use rewards: Take advantage of rewards programs by redeeming points for discounts, vouchers, and other offers.

  • Practise responsible usage: Use your credit card for planned expenses that you can afford to repay on time. Check your statements regularly for inaccuracies. Maintaining healthy credit habits is important.

ALSO READ: How To Manage Your Credit Card Bills Effectively

How Do Credit Cards Work?

Making a purchase: You can use your credit for both- online and offline purchases. When making an offline purchase, the store executive will swipe or insert your card into their POS (Point Of Sale) machine, requesting your PIN (Personal Identification Number) for authentication. In case of contactless payments, the executive will simply tap your credit card on the card machine. For an online purchase, you can fill the details of your card and authorise the payment through OTP (one time password). In case you have tokenised your card, you simply need to enter the OTP or Swipe To Pay in the case of OneCard.

Authorisation: The POS machine reads the information on your card’s magnetic strip or chip and transmits that data and PIN to your issuing bank. The bank verifies details like your credit limit, identity and card status to approve or decline the transaction. The process occurs through a payment gateway in an online transaction. You need to fill the details of your card along with the CVV number.

Approval and receipts: If the transaction passes through the approval process, the POS machine prints charge slips or receipts - one for the retailer and one for you. For online purchases, you get a notification on your registered number, e-mail address or on your app in the case of OneCard.

Billing and payment: You are billed for the purchase in your following credit card statement, and the retailer receives payment from the bank a few days later. Credit card networks like Visa or Mastercard provide the underlying infrastructure to facilitate this seamless transaction process.

Understanding Credit Card Limits

Now that we know how to use credit cards, let’s understand credit limits. A credit limit is the maximum credit a person can borrow from the issuing bank. Banks set this limit based on your income, credit history and its policies. Over time, you can increase or decrease your credit limit.

Alongside, there are secured cards that you can get against fixed deposits (FDs). The amount can be anything starting as low as 2000 depending on the credit card issuer. The best part is most credit cards will offer you a % credit limit that is 100% of your FD amount.


By understanding credit card meaning, credit card uses, and how to use credit cards, you can make wise choices and enjoy the advantages of credit cards .

The simplicity and flexibility of credit cards have made it popular among youngsters in India. Consequently, the usage of credit cards has increased in the recent years.

Whether you use a regular credit card or a metal card like OneCard, make the most of its benefits and features while practising financial prudence.

Metal Credit Card

**Disclaimer: The information provided in this webpage does not, and is not intended to, constitute any kind of advice; instead, all the information available here is for general informational purposes only. FPL Technologies Private Limited and the author shall not be responsible for any direct/indirect/damages/loss incurred by the reader for making any decision based on the contents and information. Please consult your advisor before making any decision.