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What is a credit card? How to apply online for a credit card?

A credit card can help you manage your cash flow by letting you buy things now and pay for them later. Our handy guide will help make sure you understand the basics so you can use your credit card wisely.

What is a credit card?

Essentially a credit card is a tool that lets you buy something now and pay for it later. The company that issues the card pays for your purchases up front, trusting that you will pay them back later.

You can use a credit card to make online purchases, and pay for products and services at stores, outlets, hotels and restaurants that allow credit card payment. You can also use it to get cash advances at ATMs, but we don't recommend doing this (more on that later).

You're able to spend up to your certain amount of credit limit, and pay what you've spent back to the card issuing banks.

What is a credit card limit?

Your credit card limit is the maximum amount you can borrow. The card issuer determines your limit mainly by looking at your financial situation at the time you apply for a credit card.

What is a credit card statement?

A credit card statement is the bill your card issuer sends you at the end of your billing cycle. It lists all of your transactions and your outstanding balance (the total amount you owe for this billing cycle). It also tells you when your payment is due and the minimum amount you would need to pay (minimum payment).

What is minimum payment?

The minimum payment is the least you have to pay each month to keep you out of penalty or bad debt. It's usually approximately 2.5% of your outstanding balance, but each issuer will have their own way to set the minimum. The unpaid balance will be charged interest according to the bank.

You can also choose to make partial payment or monthly instalments (which should be equal to the minimum payment), or pay off your balance in full. Paying off the balance in full (or paying as much as possible) is a smart choice. If you don't repay in full, you'll also be charged interest. Remember: the longer it takes to repay the debt, the more interest you'll be charged.

Credit card repayment

There are many ways for credit card repayment, the most common ways are:

  • Set auto debits from bank account
  • Transfer money from other bank accounts to your credit card account via CEFTS
  • Go directly at a branch or transaction office of the card issuing banks and pay

What is interest on a credit card?

Interest is a charge you pay for borrowing money. It's a percentage of what you owe. If you don't pay off your credit card balance in full after receiving your bill each month, you'll be charged interest on the amount you owe.

Why use a credit card?

There are several benefits to having a credit card as long as you use it responsibly. You can:

Spread the cost of big-ticket items

Want to book a holiday or buy a new sofa? You can make a purchase and then repay the balance over the course of several months.

Build your credit rating

Banks don't know how well you can pay back debt if you have no credit history. A credit card can help you build up a good track record of paying off debt. This can help prove you're responsible when it comes to applying for larger loans like a mortgage.

Prepared for emergencies

A credit card can help cover repairs or unexpected expenses.

Besides, credit cardholders can enjoy a bunch of discount offers, installments, rewards or cashback. HSBC credit cards currently have exclusive offers up to 40% off on dining, entertainment and shopping.

Things you shouldn't use a credit card for

Cash advance

While you can use your credit card to withdraw cash at the ATM, it's always better to use your debit card to check the product page of debit card. When you use a credit card to get a cash advance, you're charged interest as soon as you withdraw the money, and this can add up fast.

A few things to consider when you apply for credit cards

Before you apply for credit cards, there are some key things to think about:

How you'll handle temptation

With a credit card you may be able to spend more than you're really comfortable with. Before taking one out, consider how you'll handle any temptation and whether it's the right option for you. If you decide it is, then you should set some rules for yourself on spending. These can be simple things, such as to only spend within a certain amount each month, or to only use it for emergencies or big purchases.

Your paying habits

If you're planning to pay off your bill in full every month, the interest rate may be less of a concern to you, so you could consider a credit card with the lowest annual fee. If you're going to carry a balance, however, it may be worth looking for a card with the lowest possible interest rate. Keep in mind that you don't want to be setting yourself up with long term debt – carrying a debt indefinitely is not what a credit card should be used for.

Fees and charges

Credit card issuing banks may charge an annual fee on your credit cards. If you use your credit card to purchase services or items sold in a foreign currency, there's a chance you will be charged card transaction fees.

You could also be charged a fee if you go over your credit limit, or make a late payment. This could harm your chances of getting credit in the future.

Annual Percentage Rate (APR)

You'll often see the measurement of APR on credit cards. What is this? APR is the way lenders describe the cost of borrowing money over a year – taking into account the purchase interest rate and fees associated with a credit card. When comparing credit cards, you can look at the representative APR to get an idea of how much a credit card could potentially cost you. The HSBC APR is currently 18%.

How do you apply for a credit card

You can apply for an HSBC credit card if you:

  • Are over 18 years old
  • Have a minimum monthly income of at least LKR30,000

In case, you do not meet the above income requirements? You can apply for our secured credit card with a term deposit collateral.

Enjoy cashback on your daily essentials, telco and online transactions with an HSBC Cashback Credit Card


Some credit cards may have additional eligibility requirements, for example HSBC's Premier Credit Card is only available to HSBC Premier customers (to check our Premier accounts and see what exclusive features and benefit you can enjoy).

Before applying for any credit card, make sure you're familiar with the terms and conditions, as well as the credit card application requirements.

You may be able to apply online and then the credit card provider will check your credit history and income profile to see if you're a suitable candidate. The better your credit score is, the more likely you are to have your application accepted.

Making the most of a credit card

From managing your spending to building credit, here are some tips to help you make the most of your credit card.
Get to know the differences between the main types of credit cards and how they could match your needs.
Get to know what a rewards credit card can offer you, and how much it could cost you to use one.
When it comes to credit cards, there's no magic number you should have or blanket rules that will suit everyone.

This document is issued by HSBC, Sri Lanka and is intended for reference and illustrative purposes only. It does not constitute an offer or advice for you to purchase from or otherwise enter into a transaction with HSBC.

Please note you should make your own independent assessment prior to opting for any product or using the product.