What is a Credit Card? Smart Ways to Use a Credit Card

If you’re wondering what a credit card is, how to use it properly, what important points to keep in mind, and have many other related questions, don’t miss this article.

A credit card is a smart financial tool that offers maximum convenience for personal spending and financial management. With a credit card, you can shop, pay bills, and even earn reward points—making all these activities easier than ever before. However, to fully benefit from these advantages, it is crucial to understand how to use your credit card wisely. Let’s explore more with VPBank in the article below!

1. What is a Credit Card?

A credit card is a type of bank card that allows the cardholder to make transactions within a credit limit granted by the issuing bank based on an agreement. The operating principle of a credit card is “spend now, pay later,” enabling users to shop, pay for services, or withdraw cash without having funds in their account at the time of the transaction. The credit limit is determined by the issuing institution based on your credit score and history.

What is a credit card?

A credit card is a plastic card (of standard size) that contains a magnetic stripe and a data chip storing information. When the card is swiped, the credit card reader identifies the cardholder, their account number, and other relevant details, allowing the card to be used as a payment method in place of cash or a check.

1.1 What is a Credit Card Limit?

The credit card limit is the maximum amount a cardholder is authorized to spend using their credit card. This limit is determined by the bank based on various factors, such as the customer’s income, credit history, and financial capacity at the time of approval. A higher credit limit reflects greater trust from the bank and provides the cardholder with more flexibility to conduct high-value transactions.

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1.2 What is a Credit Card Statement?

A credit card statement is a detailed report of all transactions made during a billing cycle, typically one month. The bank issues this statement to the cardholder at the end of each cycle, including information such as transaction details, current outstanding balance, payment due date, and minimum payment required. The statement helps cardholders monitor their spending and serves as a basis for timely repayment.

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1.3 What is a Credit Card Interest Rate?

The credit card interest rate is the fee charged by the bank to the cardholder if the outstanding balance is not fully paid by the due date. Interest is calculated as a percentage of the unpaid balance and applies only to the amount not settled. Many banks offer an interest-free grace period (usually 45 to 55 days) for new transactions, giving users additional time to pay without incurring interest.

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1.4 Types of Credit Cards

Credit cards are categorized based on features, benefits, and target customers. Common types include:

• Cashback Credit Cards: Offer a percentage of cash back on spending, typically ranging from 1% to 5%, depending on the transaction type.

• Rewards Credit Cards: Accumulate points with every purchase, which can be redeemed for gifts, airline tickets, or services.

• Travel Credit Cards: Provide travel-related benefits such as insurance, flight discounts, and hotel booking perks.

• Business Credit Cards: Designed for business-related expenses, offering detailed reporting and tailored benefits.

• Premium/Luxury Credit Cards: Target high-income customers with exclusive privileges like personal assistants and access to VIP lounges.

Credit cards are classified according to many different criteria

Each type of card has its own advantages and benefits. Users should consider their personal needs and spending levels to choose the most suitable card.

2. When to Use and When to Avoid Using a Credit Card

Credit cards offer numerous benefits when used properly but can also pose risks if not managed responsibly.

Situations When You Should Use a Credit Card:

• Safe Online Shopping: Credit card payments often include additional layers of protection, making it easier to dispute charges if any issues arise.

• Everyday Payments: You can conveniently pay for dining, shopping, utility bills, and more. This payment method is especially advantageous for high-value purchases or transactions made abroad.

• Installment Purchases: Using a credit card to register for installment payments saves time. Customers often enjoy 0% interest installment plans when shopping at merchants partnered with the card-issuing bank.

• Enjoy Attractive Benefits: Different card types offer various perks such as cashback, travel miles, reward points, and additional services like installment payment options and partner discounts. New cardholders may also benefit from waived annual fees for the first year.

When should we use credit cards?

Situations When You Should Avoid Using a Credit Card:

• Unnecessary High-Value Transactions: For purchases such as cars, major home repairs, or business investments, consider loans with lower interest rates instead.

• Inability to Repay: Avoid using credit cards if you are experiencing financial difficulties or are unsure about your ability to repay on time.

• Overspending Beyond Budget: Do not use credit cards for expenses that exceed your planned financial budget.

• Paying Off Other Loans: Avoid using credit cards to pay off loans with lower interest rates, as this can increase your overall financial costs.

• Medical Bill Payments: Medical expenses, especially at premium hospitals or for cosmetic procedures, can be very costly—sometimes equivalent to several months of salary. If your monthly income is not in the high range, avoid the risk of paying medical bills with a credit card.

• Cash Withdrawals: Credit cardholders can withdraw cash from ATMs; however, this incurs high fees, typically around 4%, which can cause credit card debt to escalate rapidly.

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3. How to Use Your Credit Card Wisely

Below are detailed guidelines for effective credit card usage.

3.1 Activate Features Before Using Your Card

Right after successfully registering for a credit card, you can activate and use some features via the digital banking app before receiving the physical card. Activation steps may vary depending on the app interface. Here’s how to do it on the VPBank NEO app:

Step 1: Open the VPBank NEO app, select the Maker account, and log in. On the main screen, choose “Cards,” then select ☰ from the card list to access the Card Services interface.

Access the card on the home screen after logging in

• Step 2: At the Card Services screen, click “Activate card”.

Select Activate card on the Card Services screen

• Step 3: Select the card you want to activate and click “Activate now”, check the list of cards about to be activated and click “Confirm”

Click Activate immediately after selecting the card you want to activate

• Step 4: Enter the OTP code to the registered phone number, the Card Activation request has been successfully initialized.

Card Activation Request Successfully Initiated

Commonly activated features before receiving the physical card include:

• Viewing card information

• Locking/unlocking the card

• Enabling online payments

• Setting spending limits

Early activation allows you to start using your card for online transactions without waiting for the physical card, saving time and enabling you to take advantage of promotions immediately.

3.2 How to Use Key Features of Your Credit Card

Credit cards offer many useful features to accommodate diverse payment needs.

Point of Sale (POS) Payments: When making payments directly at retail locations, customers can simply tap or swipe their card on the POS terminal without entering a password or PIN. Additionally, you can link your card to digital wallets such as Apple Pay, Google Pay, or Samsung Pay to make contactless payments via NFC technology, providing a fast and convenient checkout experience.

Tap your credit card on the POS machine to pay

Online Payment Process:
When making online payments via e-commerce platforms, the basic procedure involves three main steps:

• Step 1: At the checkout page, select credit card as the payment method.

• Step 2: Enter all required card details such as card number, cardholder name, expiration date, and the CVV/CVC security code found on the back of the card.

• Step 3: Authenticate the transaction by entering the OTP (One-Time Password) sent to the phone number registered with the bank, then confirm to complete the transaction.

Cash Withdrawal at ATMs:
Withdrawing cash from a credit card at ATMs follows a process similar to debit cards. However, it is important to note that cash withdrawals on credit cards usually incur immediate interest charges and a high fee (approximately 4%, depending on the bank). Therefore, this option should only be used when absolutely necessary.

Installment Registration:
The installment feature allows you to split large payments into multiple installments with preferential interest rates. After paying the full amount for a product using your credit card, you may contact the bank’s customer service or use the digital banking app to register for installment conversion with a suitable term.
For detailed guidance on using VPBank credit cards for installment payments, please refer to: What is Credit Card Installment? Immediate Guide to Purchasing with Installments.

Besides the basic features, many credit cards offer additional benefits such as purchase protection insurance, travel insurance, concierge services, and other exclusive privileges.

3.3 How to Quickly Pay Off Your Credit Card Balance

The outstanding balance is the monthly payment amount the cardholder owes to the bank. When the payment due date arrives, cardholders can choose to pay the full balance or the minimum payment required by the bank. The following are common methods for credit card debt repayment:

• Internet Banking/Mobile Banking: Log in to the banking app, select the credit card payment function, enter the payment amount, and confirm the transaction.

• Automatic Payment: Customers can register for automatic payment services at the bank, which will automatically debit the payment amount from the linked account on the due date without requiring further action.

How to pay off credit card debt quickly

• Payment via E-Wallets:
  Using popular e-wallets such as MoMo and ZaloPay, customers can quickly pay off their credit card balances online without the need to visit a branch.
• Payment from Other Banks:
  Cardholders can transfer funds from accounts at other banks to their credit card account number. Please ensure to include the correct transfer reference as required by the issuing bank.
• Payment via ATM:
  This method is suitable when you need to pay in cash. However, it is advisable to make the payment 2-3 days before the due date to avoid delays caused by system errors.
• Payment at Bank Branches:
  Customers can bring their credit card and valid identification to a bank branch to make payments. Although simple, this method is time-consuming and less commonly used.
• Payment via Online Banking on the Bank’s Website:
  By logging into the bank’s official website, customers can use the electronic banking service to settle their credit card balances conveniently.

To ensure timely payments, it is recommended to pay at least 2-3 days before the due date, especially when using interbank transfers which may require additional processing time. Late payments not only incur penalties but can also negatively affect your personal credit history.

3.4 Tips for Smarter Credit Card Usage

VPBank shares the following tips to help you use your credit card more wisely:

• • Avoid Penalties and Extra Fees: Always pay your outstanding balance in full and on time to avoid unnecessary interest charges and penalty fees. Minimize cash withdrawals on your credit card and strategically utilize the 45-55 day interest-free period to spend without incurring fees.

  • Manage Your Finances Wisely: Avoid using multiple credit cards simultaneously as it may lead to poor financial management and uncontrolled spending.

Tips for Smarter Credit Card Usage

Maximize Credit Card Benefits:
Prioritize using your credit card at brands within the bank’s partner network to fully leverage discounts, cashback, or reward point accumulation. Take advantage of 0% interest installment plans, which offer significantly greater benefits compared to conventional installment purchases.

Use Your Credit Card Safely:
Only hand over your card to payment staff when making a transaction and promptly retrieve it afterward to prevent misuse. When paying offline, cover the CVV code with a sticker or paper to avoid information theft. Always exercise caution when making transactions and avoid using your card on untrusted websites.

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4. How to Apply for a Credit Card? Are There Any Fees?

Applying for a credit card is straightforward, but it is important to understand the requirements, procedures, and steps involved.

4.1 Eligibility Criteria

General requirements for credit card applications include:

• Vietnamese citizens or foreigners residing and working in Vietnam, as well as authorized individuals or companies permitted to use the card.

• Age 18 years or older.

• Stable monthly income.

In addition to these general conditions, each bank may have specific requirements depending on the card type. Please refer directly to the bank’s official website or consult with bank representatives for detailed information.

Among current banks, VPBank offers particularly simple application criteria: applicants must have a minimum monthly income of 4.5 million VND and be aged between 22 and 60 years.

Open credit card at VPBank

4.2 Required Documents for Credit Card Application

Please prepare the following documents carefully. For each category, only one type of document is required:

Personal Identification Documents:

• National ID card

• Citizen identification card

• Passport

• Military ID card

Financial Verification Documents:

• Salary account statement

• Salary slip / salary confirmation letter (for customers working at government agencies)

• Insurance contract accompanied by invoice or receipt

• Images of credit card and statements from other banks (for customers holding fewer than three credit cards from other banks)

• Vehicle ownership documents

Employment Verification Documents:

• Labor contract

• Salary raise or promotion decision letter

• Business registration certificate

Residence Verification Documents:

• Household registration book

• Driver’s license

Proof of Residence Documents:

• Long-term temporary residence registration

• Utility bills / notices / credit card statements / salary statements

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4.3 How to Apply for a Credit Card

Customers can apply for a credit card via two methods:

• Traditional Application: Bring the prepared documents to a bank branch and follow the instructions provided by the bank staff.

• Online Application: Register through the bank’s digital banking application without the need to visit a branch, saving time and effort.

5. FAQ

 

5.1 Which Bank Should I Choose to Open a Credit Card?

Consider the following criteria to select a reputable bank that best suits your needs when opening a credit card:

• A reputable bank highly rated by consumers

• A wide variety of credit card options

For example, VPBank is certified with ISO/IEC 27001:2013 for Information Security, ensuring that all customer information and transactions are fully protected.

5.2 Can I Open a Credit Card Without Proof of Income?

You can open a credit card without providing income verification through the following four methods:

• Applying for an additional (supplementary) credit card

• Already holding a credit card from another bank

• Having active life insurance

• Having traveled abroad within the past five years

5.3 Can I Transfer Funds Using a Credit Card?

According to bank regulations, credit cards do not support fund transfers. This is because credit cards function as a lending tool from the bank, allowing customers to utilize a credit limit for payments only. Therefore, customers cannot use the credit limit for transferring funds. For more detailed guidance, please refer to: Can I Transfer Funds Using a Credit Card?

5.4 Can I Open Two Credit Cards Simultaneously?

You are permitted to open two credit cards concurrently from the same bank. For instance, you may hold both a Platinum and a Classic credit card. However, it is advisable not to open too many cards to maintain effective spending control.

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You May Also Be Interested In:

• What is a MasterCard? Discover the Features of MasterCard

• Three Dos and Don’ts When Applying for a Credit Card

• How to Create a VPBank Online Account Using Just Your Phone

The above information provides detailed answers to common questions about credit cards. Explore the attractive benefits of VPBank’s credit cards and enjoy an advanced payment method today.