Thinking of making a purchase? Among the several payment options tucked away in your wallet, credit card seems to be more lucrative, isn’t it?? And why not!! Where else would you get such a splendid opportunity of “buy now, pay later??”
Credit cards; also known as plastic money are tools that allow you to defer your cash outgo everytime you make a purchase or spend money. It allows the holder of the card to purchase goods and services up to a fixed limit, based on the person’s commitment to pay the amount plus an interest to the issuing financial institution or bank if the payment or clearance of dues is not done in time.
Credit Cards are issued by Banks based on the Buying Power of the Card Holder. Buying power in turn gets determined by the Individual’s Income and past Credit History. On the whole a credit card is a very handy asset provided it is used correctly and in compliance with the issing entities guidelines.
How a Credit Card Works?
Most people fall into the ‘trap’ of credit cards simply because they are unaware of how it works. Learning how credit card works will not only enable you to break-free your inhibitions about ‘credit card trap,’ but will also empower you with the ‘POWER OF MONEY.’
When you purchase something with your credit card, the merchant swipes the card through a machine that instantly reads information pertaining to the card via a magnetic strip at the back of your credit card. The merchant then feeds the purchase amount, followed by which the machine connects to the issuing bank of the card via telephone lines. The bank will verify the existence of the credit card, whether it has been reported as lost or stolen, and whether the transaction is beyond the customer’s credit limit. Having verified every aspect, the bank sends confirmation for the payment, and the merchant immediately receives the payment for the same. A credit slip has to be acknowledged by the customer to approve the transaction.
On the following month’s billing date, the bank will calculate an interest (if any) on total amount due on the bank credit card, add service charge, and overdraft fee if any, and send it to you for payment within a due date. You can either pay off the full amount before the due date or only the minimum amount due as mentioned by the bank. However, paying your credit cards bills after the due date will attract late payment fees, which will added to your next billing amount.
Interest Charges on Credit Card
Before you get driven by a lucrative credit card offer, make sure that you inquire about the interest rates charged by the issuing bank. In India, credit card interests are typically charged at a rate of 3.35 – 3.49% per month. Compare credit cards based on the interest rates and other fees charged by them, and make the best decision.
Benefits of Credit Cards to Customers:
The temptation of credit cards is irresistible!! Not only it provides you a splendid opportunity to buy on credit, but also builds your credit worthiness, which is going to pay well later. Here is a glimpse of some of the key benefits of credit cards to customers:
- Makes your purchase and paying utility bills convenient, without having to feel the heat in the pocket
- Get rid of carrying hard cash in your pocket; credit card is small, compact, and easy to carry anywhere
- Acceptable anywhere in India
- Redeem lucrative reward programs and enjoy great discounts on your shopping with your credit card
- Shop online or pay your bills, anytime, anywhere, by using your credit card online
- Build your credit worthiness
Features of Credit Card:
Some of the best credit card in India presents a myriad of features as mentioned herewith:
- Alternative to hard cash
- Comes with a specific credit limit
- Maintaining record for all transactions
- Regular credit card charges
- Grace period
- Additional charges on late payment
- Higher fees for cash withdrawals
- Rewards points and discounts
- Service tax
Credit Card Security Problems and Solutions:
Security of the credit card primarily lies on its number, as well as the physical plastic card. Hence, whenever another person gets access to the credit card or its number, its security is compromised. Since shopping with credit cards in India is majorly not protected by a secured ‘pin,’ chances are high for lost or stolen cards to be misused by unscrupulous people. Moreover, once a person has your credit card number, the same can be misused for shopping online, providing a transaction password.
As a solution, it is always recommended to report lost or stolen credit card to your bank immediately, which will instantly lock your card on confirmation and no transaction can be made by another person. For online transactions, set a secret password and don’t share it with anyone. If anybody tries to change your online transaction password, you will get the intimation on your registered mobile number or email address.
So, before you get your credit card, it is important to learn about different aspects and compare credit cards on the basis of interest rates, late payment fees, over limit charges, reward points, or other important factors.
Policybazaar lets you compare credit cards on all the above parameters within 60 seconds.
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