Floater Credit Cards: How do they work and who needs them?

Floater credit cards or supplementary credit cards can be quite useful for meeting the financial requirements of a family. A floater credit card is an additional credit card that shares the credit limit with the primary card.

These cards can be given to a family member, say a spouse. Virtual credit cards that enable UPI (Unified Payments Interface) payments have become quite common these days. In most cases, card issuing banks are offering these virtual credit cards as floater cards, which also share the credit limit with the primary card. Here are some details that you should keep in mind before using floater credit cards.

What are floater credit cards and how do they work?

A floater credit card is just an additional credit card issued either in your name or given to a family member. It is usually a pre-approved card that is given without any documentation or verification as it is offered entirely on the basis of a primary card. Do remember that the overall credit limit still remains the same as the additional card is issued only against your primary credit card. 

For instance, if your credit limit is ₹10 lakh, it will be shared between the two credit cards. Similarly, the cash limit will also be shared among the cards.

“Issuance of new credit card with shared limit will be subject to bank’s internal policy guidelines. The individual limit for the new credit card will be subject to availability of limit in the existing card,” according to HDFC Bank’s guidelines on floater cards.

Separate bill statements will be generated for primary credit card (existing card) and floater credit card on same/different dates with their respective minimum due amount and total due amount. The outstanding bill amount should be paid to the respective credit card. In case of incorrect/excess payment made to either of the credit cards, the same will not be adjusted towards the outstanding amount of the other credit card. To put it simply, you have to make two credit card payments in a monthly cycle separately if you have a floater credit card.

“Non-repayment of outstanding on either of the card (s) separately, shall lead to applicable charges in line with the ‘Most Important Terms and Conditions (MITC)’ for credit cards,” according to HDFC Bank. And you cannot swap reward points between these cards. “Reward points accrual is as per the respective credit card features and they cannot be transferred between the existing credit card and the floater credit card,” HDFC Bank said.

If you have applied for a temporary limit enhancement on your primary card, you will not be able to get a floater card. If the mailing address of the floater credit card is different from that of the existing primary credit card, the customer has to update it by making it the same for both the cards.

Will a floater credit card help enhance your credit limit?

Not necessarily. The credit limit is typically determined entirely on the utilisation of your primary as well as floater credit card, your repayment record and income status. If you have been paying credit card bills on time and have kept your credit utilisation at reasonable levels for both the primary and the floater card, the card issuing bank will automatically increase your credit limit.

Who needs a floater card?

The floater credit card, like all other cards, is need-based. For instance, if you travel frequently or live in a city that is different from where your family resides, a floater credit card can be quite useful. It will allow your spouse to make the purchases required for the household with the additional card even as you continue to use the primary card for your expenses.

With most purchases being made using UPI, a virtual credit card that enables contactless payments can become your floater card. In fact, banks issue virtual cards that share the credit limit and other features with the primary card as a floater. You can have a metal/plastic card that you can use at PoS (point of sale) terminals and for online payments while also having a virtual credit card as a floater for making UPI payments.

Allirajan M is a journalist with over two decades of experience. He has worked with several leading media organisations in the country and has been writing on mutual funds for nearly 16 years.