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Hand with credit card; image used for HSBC Vietnam How do credit cards work article page

How do credit cards work?

What is a credit card?

You can use a credit card to make online purchases and pay for products, services at stores, outlets, hotels, restaurants, etc.

Credit card issuing bank will grant you a certain amount on the credit card known as your credit limit. You borrow money within your credit limit to make purchases, and pay it back either in full or in monthly instalments. If you don’t repay in full, you’ll also be charged interest.

There is a minimum repayment which you have to make on the payment due date. But it’s always best to repay in full (or as much as possible). Remember: the longer it takes to repay the debt, the more interest you’ll be charged.

You’re able to spend up to your credit limit. The credit card issuing bank will send you a bill every month with a list of all your transactions along with details of payment date and amount you need to pay.

What is interest?

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.

Some credit cards offer a 0% introductory interest rate for a certain amount of time when you first get the card. However, once that period is over, you'll start to be charged interest if you don’t pay the full balance every month.

woman shopping online with credit card and passport

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.

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. 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.

Big purchases like new cars, major home renovations or starting a business

Credit card interest rates can be quite high, so if you're spending a large amount, a lot of your money could just be lost to interest. In situations like these, you might want to consider applying for a personal loan instead.

young couple discussing credit card debt on couch

A few things to consider

Before you apply for a credit card, 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)

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.

How do you apply for a credit card

You can apply for an HSBC credit card if you:

  • are over 18 years old
  • a resident in one of the mentioned cities or provinces: Hanoi, Ho Chi Minh City, Dong Nai, Binh Duong, Long An, Da Nang, Hue, Hoi An, Ba Ria - Vung Tau, Tay Ninh, Bac Ninh, Vinh Phuc, Hung Yen, Hai Duong, Hai Phong.
  • have a regular income, typically salary of at least VND 6 million for Vietnamese at least VND15 million salary for foreigners, and at least VND15 million for Vietnamese who are self-employed or business owners.

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

Some credit cards may have additional eligibility requirements, for example HSBC’s Premier Credit Card is only available to HSBC Premier Customers.

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.

See which of our credit cards is right for you.

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