What is the difference between a credit card and a debit card?
A credit card will help you when your account does not have enough money to cover your needs or luxury items. Since you've maxed out the credit card, you'll have to pay it back later within 30 days, and if not, you'll have to pay some interest by paying back the minimum amount. Also, a credit card has nothing to do with your bank account and you are free to spend up to your credit limit.
A debit card is also known as an ATM card and works like your bank account. With a debit card, you can only withdraw or use the amount in the account. Every time you use the debit card, your account will be charged. So make sure you have enough money before paying anything.
How do credit cards work in Sri Lanka?
Credit cards work in a similar way to personal loans. When you buy something with a credit card in Sri Lanka, you are borrowing money from the card issuer, which must be paid back by the end of each month. You must pay back the entire amount borrowed or interest will be charged on the unpaid amount.
Undoubtedly, credit cards go a long way in managing your finances and can get you good credit if used properly. But if you don't understand how it works, you'll fall into an even bigger debt trap.
Let's read in detail how a credit card works:
For purchases: Buying anything with a credit card is a simple process. You can buy things online or offline by entering your card details at checkout. When shopping online, provide your credit card details and the payment will be processed under appropriate security checks. The transaction may fail if you have exceeded the credit limit. To buy something in stores, you need to swipe the card or tap it on the payment terminal and the transaction will be settled with your signature or PIN. Enjoy a hassle-free credit card shopping experience.
Refund by credit card: Paying off the credit card is essential or you will end up with significant debt at the end of the year. In addition, if you do not repay the full amount within 30 or 50 days, the bank will charge interest on the outstanding amount. In order to avoid paying interest, it is recommended to pay off the entire amount or at least the minimum amount. If you do not repay the full amount, you are entitled to payment of additional costs.
Main advantages and features of credit cards
You can have a credit card and enjoy many benefits such as: B. Short-term, interest-free loans for every purchase without having to worry about transferring different currencies. It is a useful alternative to cash.
It helps in building credit score/history which is useful for availing other financial services like loans etc.
A grace period or minimum number of additional days is offered to the cardholder to pay their credit card bills without incurring interest or finance charges.
Credit cards offer the cardholder the ability to make payments in domestic and foreign currency.
Every credit card has a credit limit written on the card. This limit is determined after checking the creditworthiness of the cardholder.
It offers various features like reward points, gift vouchers, coupons, cash back and extra discounts on purchases.
There is a set credit limit for purchases and cash withdrawals with credit cards.
A credit card balance transfer allows a cardholder to transfer the outstanding balance of a credit card account to an account with another credit card company.
Cash Alternative: It is always good to keep a credit card instead of carrying cash instead of carrying cash. First, it is safe and you don't have to worry about theft or money theft.
Emergency: With an Aa credit card, you can withdraw cash instantly from any nearby ATM.
Make big purchases: You can also pay bills with a credit card. A credit card is a fantastic option for buying expensive items or making large purchases. This allows you to divide the large amount into manageable installments. You can pay utility bills and phone bills with a credit card.
Build your credit score: If you plan to borrow in the future, getting a credit card proves beneficial as it improves your credit score. The more faithful you are in repaying your credit card fees, the more likely you are to build a good credit rating. If you have no credit history, you will not be able to get loans, as most banks will reject such applications.
Welcome offers: Many banks and financial institutions offer welcome discounts or bonuses to entice customers to purchase a credit card. These offers are valid for a limited time. Therefore, if you apply within this time frame, you will be entitled to extremely welcome benefits.
Reward Points or Cash Back: Every time you make a purchase using your credit card, you'll get some reward points or a cash back reward credited to your account. Rewards points can be collected for various gifts, while cash back rewards are credited directly to your card account. Rewards points or cash back will be credited to your account with each purchase. These reward points can then be redeemed to buy something of that particular amount, or these points can be used to repay the amount spent on a credit card.
Secure Transactions: Transactions made with credit cards are safe and secure due to a feature called chip and pin system. The payment gateway performs two-step authentication for online credit card payments. Apart from the basic details, the cardholder needs to enter an OTP to complete the transaction. However, this feature protects your card from fraud because if someone tries to do this, you will receive an OTP and the fraudster will not be able to complete the transaction.
Keep track of your purchases: Keeping a proper record of cash transactions is complicated, but with a credit card you can always download your monthly statement to see all your spending and keep a record.
Abuse can ruin your credit rating: Since your spending and repayment behavior determines your credit rating, abuse should be avoided. If you are late paying your credit card balance, your points balance will also be affected.
What are the different categories of credit cards in Sri Lanka?
Although Sri Lanka is not yet a mature market for diversified financial products compared to the rest of the developed world, there are several categories of credit cards, each with different features and functions. In Sri Lanka, the following are the most common card categories you can apply for:
- Credit cards: A balance transfer transfers your debt from one credit card to another. This process is usually done to save interest every month.
- Reward credit cards: These cards give you points for transactions you make with your credit card. Rewards points can be redeemed for gifts, coupons and other goodies listed in the issuer's rewards catalog.
- Cashback Credit Cardsget back a percentage of the amount spent, which is returned to the credit card holder.
Low interest rates: These cards offer lower interest rates compared to traditional cards.
- Travel credit cards: With these cards, you earn mileage points for selected transactions. Mileage points can be redeemed for travel-related benefits such as airfare and seat upgrades on participating airlines.
Premium: Premium cards offer offers and benefits focused on higher value products and services.
List of banks offering credit cards in Sri Lanka
Bank of Ceylon Credit Cards
Commercial bank credit cards
DFCC Bank Credit Cards
Hatton National Bank Credit Cards
Nations Trust Bank Credit Cards
NDB Bank Credit Cards
Pan Asia Bank Credit Cards
Peoples Bank Credit Cards
Sampath Bank Credit Cards
Seylan Bank Credit Cards
Standard Chartered Bank Credit Cards
HSBC Credit Cards
What is an add-on card and when should I apply for one?
An add-on card is an additional credit card that can be issued in the name of the primary account holder upon request. As a premium account holder, you can decide who you want to gift the add-on card to. However, an additional cardholder must be at least 18 years of age and in most cases will be issued to your spouse or child.
A supplemental cardholder does not have to meet the minimum requirements of the primary account holder, making it an ideal choice for your spouse who may not be working or your child who needs a card for emergencies.
What is the difference between Visa, Mastercard and American Express?
Visa, MasterCard and American Express do not issue credit cards. Banks or financial institutions issue them. Visa, MasterCard and American Express are listed as payment networks. These are essentially network systems that allow credit card transactions to be processed. You earn money on every transaction. As a cardholder, you won't notice any major differences between Visa and MasterCard.
However, American Express (AMEX) is a little different.
Benefits of these payment networks at a glance include:
24/7 global customer support, no matter where you are in the world, so you can report problems or lost/stolen credit cards.
24-hour concierge services include assistance with last-minute restaurant reservations and premium flight reservations, among others.
Exclusive offers and discounts for your card type, plus exclusive access to airport lounges, golf clubs and premium hotel memberships
Globally accepted by millions of merchants around the world.
Our worldwide ATM network allows you to withdraw cash whenever you need it.
Credit Card Eligibility Criteria in Sri Lanka
The general eligibility criteria for using a credit card in Sri Lanka are as follows:
- If you are applying for a major credit card, you must be over 21 years of age
- Minimum income is 15,000 LKR.
- When you apply for a credit card, you must submit the following documents:
- Copy of your ID or passport
- Last quarter payroll statement for permanent residents
- If you are self-employed, you must submit a copy of your business registration and the most recent 6 months bank statements.
How do I apply for a credit card in Sri Lanka?
There are several ways to apply for a credit card in Sri Lanka and the card approval process usually takes one to two weeks. Before approving a credit card, banks will check your details, credit history, legal affairs, payment history and other relevant financial information.
Things to do in advance and how to apply for a credit card
Do your research: Depending on your lifestyle and budget, you can find a credit card that's right for you. Do your research and get one: Don't miss out on the extra benefits you get with the card. Any fees or rewards points must be evaluated to determine if you need a credit card. You should know if you will receive travel miles or cash back on your purchases.
Check your credit history: Your credit history can result in a credit card being rejected or accepted. So make sure you have a good track record with the bank. If you have bad credit, it will take at least six months for the bank to approve your credit card.
Apply online or at a bank branch:
Five.lk Comparison Portal: You can quickly search, compare and apply for your favorite credit card on any device. Our aim is to provide you with accurate and insightful information about financial products on the market.
Credit Card Agents: Sometimes you can find credit card agents in famous busy places like supermarkets, malls etc. However, it is quite difficult for you to compare and choose the best credit cards because the contact time with these agents is short.
Credit card payments in Sri Lanka
You can pay the amount due in full before the due date. You will not be charged any interest. However, the correct way to use a credit card is to pay the full amount each month. If you don't qualify, you can receive significant rewards. It also helps you build good credit if you pay off your balance in full each month.
If you rollover the balance to the next month, you will be charged interest on the balance. This is because the interest on cash advances is higher than the interest charged on the purchase of goods and services.
If you do not wish to receive interest on your credit card, you must pay off the remaining balance in full. That's because banks and credit card companies wait two billing cycles to decide whether to waive interest. Therefore, you must pay the balance in full before the due date. Otherwise, you will not receive interest relief if the interest is carried over from the previous month.
Reasons why your credit card may be declined
If you have received a notification from the bank that your application has been rejected, this could be for a number of reasons. However, it is best to contact the bank for the specific reasons so that they can be clarified quickly.
Various reasons that may lead to the bank refusing your credit card application include:
Insufficient income level
Bad credit history due to high debt or inconsistent loan payment patterns
Too many credit cards
CRIB credit report discrepancies
Income Exemption: Credit card holder must have the required monthly payment. If you do not meet these, the card may be declined. Each card issuer has different requirements. So look for exhibitors that match your income to get licensed.
Home/Office Location: Some banks have blacklisted areas based on the activities of their customers. So make sure you don't go to this area when applying for a credit card. The location of your home or office plays an important role in credit card approval.
Incorrect Information: Incorrect, irrelevant or incomplete information may result in rejection. Banks are very careful when issuing credit cards, so be careful not to give false information. Please check your documents and application form again, otherwise your application will be rejected without notice.
Credit report discrepancies: It takes a while for things to show up on your account. So before you apply for a credit card, be sure to check your CRIB score and report to make sure everything is correct. Sometimes your past debts are still there, settled but not updated. In this case, you may be rejected. Therefore, inform the authorities in advance.
Bad credit history: A bad credit history puts you in serious trouble and you are considered a dangerous customer if:
Too much credit: Too much credit is a problem as the issuer doubts your worth and ability to repay.
Too many credit card applications: Another major factor that leaves the issuer in doubt is the fact that too many applications have been submitted.
Credit card overuse: If you're one of those people who has a bad habit of going over your monthly limit in the coming months, this is the wrong impression. Alternatively, if you overdraw your card by up to 50% of the credit limit of different cards, your application may be rejected.
Creditworthiness: The most common reason for a credit card application to be rejected is, as mentioned, creditworthiness. Bad debt, poor repayment habits, late monthly payments and going over your credit card limit lead to rejection. Additionally, financial instability i.e. H. Using 50% of your credit limit on different cards or not having a minimum balance on your account will affect your credit rating and credit card application process. Your credit report allows banks to see your financial history for up to six months. So be sure to update your credit reports from time to time and contact the reporting agency if you need to make updates or changes.
Important things to consider before choosing a credit card
Although a credit card is very convenient, improper or improper use can leave you in dire straits. Before deciding on a credit card, do the following:
So if you decide to use a credit card, here are a few things to keep in mind:
The interest rate
Fees and Penalties
Balance sheet calculation method
Spending Habits: Before using any credit card, you need to analyze your spending habits. If you like to shop often or splurge on luxury items, but have a habit of carrying a balance from month to month, then a credit card could be a liability for you. What do you want to use the credit card for? Do you need it for emergencies or for every little thing you need?
If you're the type of person who pays bills on time and also does the same with a credit card, then choose a card with no annual fee and a longer payment period. Interest rates are irrelevant to you.
If you're in the habit of carrying a balance, you need a card with the lowest interest rates and introductory offers.
Get a rewards card with a reasonable credit limit if you want to make it a staple of your shopping.
A low interest card is best for people who use it for emergencies.
The interest rate: The interest rate of a credit card depends on several factors. It is an APR and is divided into two types: fixed and variable. With a fixed rate credit card, you can know the interest rate charged from month to month, but with an adjustable rate credit card, the interest rates fluctuate. If you pay your credit card amount early or late, or if you go over the specified limit, the fixed rate can also change. Also, the card issuer can change the price if you wish, notifying you of the change.
Credit limit: The credit limit is the amount you can spend in a certain period of time. The card issuer sets this limit. Depending on your credit rating at the bank, you can borrow any amount. It is always advisable not to exceed the credit limit too much, otherwise your credit score will be affected and the bank will reduce your limit to the minimum balance in your account. In case of exceeding the credit limit, a contractual penalty is also required.