For many Indian MSMEs and small businesses, unexpected expenses are common. A supplier needs immediate payment, a machine breaks down, or a medical emergency arises. In these situations, a credit card loan is often marketed as a quick, hassle-free solution.
But what exactly is a credit card loan? And is it a smart choice for business owners? This guide explains it in simple terms and helps you decide logically.
related post: Why You Should Never Max Out Your Credit Cards Limit: My Experience with SBI and ICICI Credit Cards
A credit card loan is a short-term loan provided by your bank against your existing credit card limit. The amount you borrow is deducted from your card limit, and you repay it in fixed EMIs.
Banks also call it:
It is different from withdrawing cash using a credit card. Card cash withdrawal charges are very high, while a credit card loan runs on fixed EMIs at lower rates.
you may like to read: why Understanding Credit Cards in India in important: A Real-Life Journey from Confusion to Clarity.
Interest rates vary across banks but most fall between 12 percent to 24 percent per year.
Below is a general view of major banks:
| Bank | Approx Interest Rate | Notes |
|---|---|---|
| HDFC Bank | Around 15 percent | Instant loan for eligible users |
| Axis Bank | 12.6 to 22 percent | Loan amount can be higher depending on profile |
| SBI Card | Around 15 percent | Encash or Encash Inline facility |
| ICICI Bank | Profile based | Fast disbursal and minimal documentation |
Before taking any credit card loan, compare it with personal loan rates offered to you. Personal loans for strong profiles may start at around 10 percent per year.
A credit card loan can help MSMEs in certain situations, but it is not the right choice for every kind of business need. Below is an honest, logical assessment.
Typical uses include urgent repairs, small inventory purchase, utility payments, travel, or tight working-capital periods.
For long-term or high-value needs, other options like personal loans, small business loans, OD/CC limits, or invoice financing are usually more suitable.
These examples help illustrate the actual financial impact.
Borrowing Rs 50,000 at 15 percent per year
Borrowing Rs 2,00,000 at 15 percent per year
Borrowing Rs 5,00,000 at 14 percent per year
Shorter tenure reduces total interest. Longer tenure increases the cost substantially.
A credit card loan is useful as a short-term emergency tool. It should not be treated as a long-term funding option for MSMEs.
It is suitable when:
It is not suitable when:
Use a credit card loan only when it truly fits your need.
Yes. The borrowed amount is deducted from your available credit card limit.
Only if you need fast approval and a small amount. Personal loans may offer better interest rates.
Yes, but only for short-term needs.
Yes, but some banks charge foreclosure fees.
Timely repayment improves your score. Defaulting damages it.
Tabrez writes practical guides for MSME owners, entrepreneurs, and small business leaders across India. BusinessZindagi simplifies finance and growth topics for everyday business owners.
This article is for educational purposes. Interest rates and policies vary by bank. Readers should verify details with their bank before taking a credit card loan.
If you want, I can also create internal linking suggestions for this post, or optimize it further for Google Discover.
If you run an MSME or small business in India, you already know that customers…
Local advertising has become the growth engine for MSMEs and small businesses across India. Most…
If you run a small business in an Indian town, you already know this truth:…
Entrepreneurship in India is emotional.People start with excitement, inspiration, even pride…But many end their journey…
Small town entrepreneur success stories are redefining India’s business landscape. With affordable smartphones, UPI, e-commerce…
Managing working capital is one of the biggest challenges for MSMEs. To solve this, banks…