How to use a credit card?

After understanding the basics of credit cards, Satish wanted to know how they were actually used in everyday life. Since he had never owned one before, he was curious about the process of receiving a credit card, making purchases, withdrawing cash if required, and understanding how his financial behaviour would affect his future borrowing ability. As he explored these aspects, he realised that a credit card is much more than a payment tool—it also plays a significant role in building a person's financial reputation. Once a customer's credit card application is approved, the bank issues a physical credit card along with a Personal Identification Number (PIN). To enhance security, the card and the PIN are generally delivered separately through different communication channels. This reduces the possibility of misuse if either item is intercepted during delivery. After activating the card, the customer can begin using it for purchases at retail stores, online shopping platforms, restaurants, hotels, and many other establishments that accept credit card payments. Every transaction made using the card is deducted from the customer's available credit limit. Instead of paying immediately from a bank account, the customer repays the bank later according to the monthly billing cycle. In addition to making purchases, most credit cards also allow customers to **withdraw cash from ATMs**. This facility is known as the **cash advance** feature. However, only a specified portion of the total credit limit is available for cash withdrawals. Since cash advances usually attract higher interest charges and additional fees from the date of withdrawal, they are generally recommended only for genuine emergencies rather than routine expenses. Whenever a customer uses the credit card at an ATM or at a point-of-sale terminal requiring authentication, the **PIN** serves as an important security measure. It verifies the identity of the cardholder and helps prevent unauthorised usage if the card is lost or stolen. Customers should always keep their PIN confidential and never share it with anyone. While learning about credit cards, Satish also came across the concept of a **credit score**. A credit score is a numerical representation of a person's creditworthiness and repayment behaviour. It reflects how responsibly an individual manages borrowed money and helps banks evaluate the level of risk associated with lending. In India, credit scores are generated by the **Credit Information Bureau (India) Limited (CIBIL)**. CIBIL maintains a comprehensive record of an individual's borrowing history, including loans, credit cards, repayment patterns, outstanding balances, and any defaults. Based on this information, it assigns a three-digit credit score that financial institutions use while evaluating loan and credit card applications. The credit score is calculated using several factors, including the customer's payment history, the number of active loans, outstanding debt, types of credit used, and overall borrowing behaviour. Making timely repayments and maintaining responsible credit usage generally contribute to a higher score, while delayed payments, defaults, or excessive borrowing can lower it. CIBIL also prepares a **credit report**, which provides a detailed summary of an individual's credit history. The report includes information about existing and past loans, credit card accounts, repayment records, and even loans for which the individual has acted as a guarantor. Banks carefully review this report before approving new credit facilities. Maintaining a healthy credit score offers several long-term advantages. Individuals with strong credit histories often find it easier to obtain loan approvals because lenders view them as reliable borrowers. They may also qualify for lower interest rates, higher credit limits, quicker loan processing, and easier access to premium financial products. In some cases, organisations outside the banking sector may also consider credit history while evaluating applications for housing rentals or certain financial services. After understanding how credit cards and credit scores are connected, Satish realised that every financial decision contributes to his long-term credit profile. Using a credit card responsibly, making payments on time, and avoiding unnecessary debt would not only help him manage his daily expenses but also strengthen his financial credibility for future borrowing. This knowledge encouraged him to view credit as a responsibility rather than simply a source of additional spending power.