Credit Card Terms Glossary - Know the Main Terms of Credit| Kotak Bank
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31 JULY, 2023

Cashless payment transactions have become extremely popular today in most economies.  While there are numerous modes available for cashless transactions, credit cards have become a popular choice. Many of us today prefer using this plastic card to make purchases as it carries innumerable perks. From cashbacks to discounts, credit card issuers offer some very good perks. However, to improve your credit card usage, it is important to stay abreast of its associated financial vocabulary. Here are the terms that you should know of when aiming to build healthy credit.

Revolving credit

Revolving credit may sound like a very complex term. However, it is nothing but an agreement on the credit. Consumers are allowed to pay the outstanding balance in full or partially. The credit can be repeatedly used to a certain limit, provided that the account is open and repayments are made on time. Available credit, minimum payment, and the balance will fluctuate depending on the purchases and payments made through the account. Typically, no interest charges are levied when the used amount is repaid within 48 days. 


In the case that you find an error in the monthly statement sent to you by the issuer, you can write back with a chargeback or raise a dispute. The issuer should acknowledge your letter within the stipulated time of 30 days post receiving it. It is essential to understand the dispute terms of your card issuer as you can encounter a billing discrepancy at any given point.

Credit limit

The credit limit is the allowed amount that you can spend through your credit card during per credit cycle. Factors such as your usage pattern and your repayment history will cause a change in your credit limit over time. The credit limit is likely to increase if you make regular payments. Conversely, late payments can lead to an increase in the credit limit.

Over limit charge

When the transaction exceeds the credit card limit laid down by the issuer, you can be charged an over limit. Typically, this fee is flat but it is reflected on your credit report and is not very healthy for your credit score.

Balance transfer

Balance transfer is growing to become a very common term. It allows you to transfer the balance from one credit card to another. This is a move that can help you avail of lower interest rates on your credit card balance.

Billing cycle

A billing cycle, also known as a billing period, is the time between when you receive your last credit card statement and when you get the next one. It usually lasts around 28 to 31 days but can vary depending on the credit card company. Since the number of days in each month is different, the length of your billing cycle may change. However, rules are in place to ensure the processes are as fair and consistent as possible.

Annual fee

An annual fee, one of the most common credit card payment terms,  is a fixed amount of money you must pay yearly. These charges range, often costing between Rs. 500 and Rs. 2,999 or even more. You can gain advantages like cash-back chances, reward points, or airline miles in exchange for the charge. Some credit cards even exclude the first year from the annual fee requirement, preventing you from paying it.

Credit Score

A credit score between 300 and 900 indicates your trustworthiness when borrowing money. The higher your credit score, the more likely you will be approved for loans and offered better interest rates.

Your credit score is determined by looking at your credit history, which includes details such as the number of accounts you have, the amount of debt you owe, how consistently you've repaid your debts, and other relevant factors. Lenders use your credit score to assess credit card payment terms and how likely you are to repay loans on time.

Grace Period

The term "grace period" describes a period of time following a payment due date, such as for a loan or life insurance premium, during which you can make a payment without being charged late fees or penalties or risking the termination of the loan or policy. You are given an extension to make your payment without suffering repercussions.


A predetermined sum of money that the borrower pays the creditor on a particular day each month is known as an Equated Monthly Instalment (EMI). These payments will repay the loan over several years, which cover both the principal and interest. By using the EMI, the borrower is able to make regular, slow payments on the loan until it is fully repaid. If you want to know your EMI, first, you need to have an idea about what are the main terms of credit, like interest rate and the outstanding amount.

Knowing the above-listed terms and understanding their implications is essential to derive the best value of your credit card. It will help you make the right decisions when using plastic currency.

End Note

Understanding the credit card meaning in simple words and key terms is crucial for maximising the benefits of your credit card usage. Terms like billing cycle, annual fee, credit score, grace period, and EMI play a significant role in managing your finances effectively. Knowing these terms empowers you to make informed decisions and utilise your credit card wisely.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.