Credit Cards make life easier and more convenient than before to purchase online or in stores , it also helps to manage finances . On the Other side it is very risky and expensive if you fail to comply with their terms.
If you’re wondering whether having a credit card is good or bad .
Before that let us introduce you to some of commonly used terms and criteria to avail credit cards . Later we will discuss about advantages and disadvantages of possessing credit card.
Frank McNamara along with his co-founder Raphal Sneider started the first credit card company named Diners’ Club Inc.
Diners’ Club card was technically a charged card whereby its purchases were made on credit. Later on, travel and entertainment card were issued in 1958 by American Express Company.
What is credit Card
In Simple Words , Credit Card allows you to borrow money from a bank within pre-approved limit without cash . This pre-approved limit is decided by the institution based on your credit score and history .
The Bank provides an grace period of 25-30 days approximately , if he fails to pay the minimum amount in due grace period , then credit card interest rates are applicable determined by institution.
Credit card – Eligibility
Credit Card Eligibilty depends on factors such as:
1) Employment (ie, what you do for earning ,salary) etc
2) Purpose of Card
3) City you are residing in
Credit card eligibility varies according to the lender and purpose of the card availed but, some basic factors are :
1) Applicants must be at-least 18 years old
2)Applicant must be salaried with a regular source of income to pay back the credit card bills.
3) He should have Savings Account
Difference of Credit Card and Debit Card
Debit Cards are issued by banks against your current or savings account . You can use or spend money only the amount available in your account . When you swipe through debit card only the amount available in your account is deducted
On the other hand , with credit card you can borrow amount to make payments when required and need to pay back borrowed amount within a stipulated time .
What is Credit card minimum Payment
It is the minimum amount of money you need to pay back within an stipulated time . This payment is the lowest amount you can pay on your credit card to avoid penalties.
Minimum payments are typically calculated as a percentage of your outstanding balance plus any fees that have been added to your balance.
That means the higher your credit card balance, the higher your minimum payment will be.
what is cvv number on Credit card
Cvv( Card Verification Value) is a 3 digit number present on the back side of your card . This code is required to complete any monetary transactions that are caried out using the card .
All financial institutions that issue debit card or credit card to their customer provide unique CVV code , which helps the institutions to verify that the card is physically available with the individual during transaction.
While Doing transactions or any virtual payment gateways try to avoid providing CVV.
What is Cibil Score
In Simple words Cibil Score is a 3 digit number which represents your credit worthiness .The cibil score ranges between 300-900 .
To avail loan the closure your cibil score to 900 ,the better your credit rating is.
Cibil score calculated mainly on the basis of reasons provided below :
1) Credit History
2) Credit Exposure
3) Paying payments within stipulated time
Higher the Cibil score , higher is your chances of loan approval .
What are the types of Credit Card
In recent trends people are moving towards cashless transactions , so depending on their spending habits various types of credit cards are introduced like fuel credit cards,airline credit cards, shopping credit cards etc
Mainly there are following four types of credit cards:
So make sure you choose the card that suits your purpose and lifestyle.
How does Credit Cards Work
When you use a credit card for any transaction, the merchant fee is paid on your behalf by the financial institution depending upon the approved credit limit .
You have to pay back the amount within stipulated period to your issuer . If you fail to do so,your issuer will levy an interest that keeps on compounding until you pay your due payments.
It will affect your credit history which in turn will effect your credit score. so it becomes difficult to get loan in next process.
Advantages of Credit Cards
1) Carrying Credit card is safer than Carrying Cash.
2) Having Credit card in pocket increases your purchasing power and pretty much required for online purchases .
3) Purchase from Credit Card provides Interest free days .
4) Credit card gives you an emergency line of credit.
5) Most of the Credit Cards works in any currency.
Disadvantages of credit cards
1) If you fail to pay back money within due date , then you will be levied interest rates compounding every month that will effect your cibil score
2) Due to more Convenience in purchasing things with credit card , it will affect your savings and also you will end up overspending ,which will imbalance your budget and transactions in long run.
3) Credit Cards have many additional charges such as annual fees, credit card surcharges and other fees. Even if you don’t use , there’s good chance these interests will be applied.
Before applying to the credit card , it is important to consider the advantages and disadvantages of credit card based on your circumstances .
If you use it wisely it will make life easier and be a great tool , but if they aren’t used wisely they can become huge financial burden.
Follow simple steps if you possess credit card
1) Don’t overspend outside your budget.
2) Pay-off your credit balance correctly within stipulated time
3) Keep safe your credit card information
BE Aware while providing your information
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