How do do banks earn profit by offering credit cards thats with banks offer credit cards

Credit Card: People in India are taking credit cards in their name. People are also spending a lot by borrowing on credit cards. Now the question comes that why does the bank issue a credit card to itself? Actually, the credit card is a big source of income for the bank. This not only increases the number of customers and is also encouraged to spend more and more.

Keep this in mind while using credit card

While using a credit card, you should keep checking the credit utilization ratio. That is, how much the credit card is used, how much you use it in a month. It has a big impact on the credit score. For good credit scores, it is advisable to reduce the credit utilization ratio or keep less than 30 percent.

Profit to bank with credit card

Banks place big bets on credit cards and offer it to you more and more. This is because banks earn profit from credit card as interest rate, annual charge, re-insurance charge, merchant fees. Apart from this, interest is imposed on the outstanding amount for not paying the credit card bill on time. Many times late payment fees are also added with interest. The bank also earns profit as interchange fees on every transaction. Credit card business is flourishing rapidly in India. In January 2025, the expansion has increased by 10.8 percent to 1.84 lakh crores in January 2025.

Bank offers on credit card

Banks attract customers through many benefits like reward scheme, cashback, air travel discounts, free lounge access. Many times people also use credit cards to make credit history or manage credit score so that they do not have any problem in taking a loan in the coming time.

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