Everything you need to know about Credit Cards.

Even in today's time, some people are still unaware of credit cards. Even if they are aware, they are afraid to use it. So, in this article, I will talk about credit card in depth. 

So, what is a Credit Card?

In simple words, a credit card is a small piece of plastic that easily fits in your wallet which can be used for online and offline transactions. Well, it’s not ‘just a piece of plastic'; it’s a very powerful piece of plastic that can be regarded as a compressed form of cash. We can define credit cards as a system that permits the buyer to borrow money from a bank or a financial organization and use it to make payments to the merchants.

How can an individual get a credit card?

To get a credit card, the consumer must fill in a form that's actually like an agreement between the credit card supplier and therefore the end consumer. The supplier then checks the financial condition of a consumer and then approves the credit card with a credit limit. A credit limit is a limit of the amount which a consumer can use within an interest-free period(interest-free period depends on different credit card companies). This is one of the major benefits of a credit card wherein you can use the money for a certain period without paying the interest. This plastic (or credit card) contains electronically encoded security information within the magnetic strip (which is usually located at the rear of the credit card). This information is used for authorizing payments whenever the buyer uses the card. 

Where are credit cards used?

The consumer can use the credit card for shopping at merchant outlets or online. This depends on the capability of the merchant to accept credit card payments. Accepting credit cards is, however, not enough. The merchant should be ready to accept payments made through the card provided by that credit card organization (of which you hold the credit card) i.e. VISA, MasterCard etc. You can also use a credit card to withdraw cash from ATMs (automatic cash machines) – also known as cash machines or Day/Night machines. But basically, credit cards are not used for Atm withdrawals due to heavy charges on cash withdrawals. There are some main credit card organisations and most of them operate in a lot of countries worldwide. They are as follows: American Express, Citi, MasterCard and VISA. Master card and VISA are probably more popular ones. There are many credit card suppliers or issuers who have tie-ups with these organisations and issue credit cards on their behalf. To make a payment using a credit card, the credit card has to be either simply swiped into a special credit card processing machine when shopping in person at shops or you can enter card details on the merchant’s website when shopping online. The credit card supplier sends across the bill for these transactions to the consumer who is then required to pay either the complete amount or a partial (minimum) amount. If the full amount is paid, no interest will be charged to the end consumer. On the other hand, the pre-agreed rate of interest is charged if the minimum amount is paid. The Minimum Amount Due is actually a trap for the consumer where the consumer keeps paying the interest without the deduction of the principle amount. This is the worst scenario of credit cards due to which many people are afraid of using credit cards. This is considered a debt trap. If you don’t pay even the minimum amount, you might land up with a late fee too. So, always a full payment is the best option while using a credit card. 

So, the conclusion is that if a credit card is used carefully without missing the payment date, then it is of great benefit. But if the payment date is not remembered by the consumer and if he/she gets into the debt trap, it may not only worsen the financial condition of the consumer but also decreases the cibil score. Thanks for reading the article till the end.