What is credit card and how to use it ?

What is credit card and how to use it – A credit card is a payment card issued to users to enable the cardholder to pay a merchant for goods and services based on the cardholder’s accrued debt.

Credit card is a card that looks like an debit card. A credit card is a thin plastic card issued by a financial institution that allows you to get a loan from a bank for a fixed period of time.

In short, this card allows you to get a loan from a bank for a fixed period of time, which you have to repay on time, otherwise you have to pay interest.

The credit card bill has a pre-determined time from the bank and the amount has to be repaid.

Credit cards are not given to everyone by the bank, so the bank takes all the financial information of the person, it is difficult for a normal person to get a credit card but it is easily given to a person who has a job.

This card is issued only if the person in front is financially able to pay the credit card bill.

In this article we will understand what is credit card and how to use it ?

Table of Contents

What is credit card and how to use it ?

What is credit card and how to use it
What is credit card and how to use it ?

A credit card is a payment card issued to users to enable the cardholder to pay a merchant for goods and services based on the cardholder’s accrued debt.

Credit Card lends a certain amount to its users which can be used in many places. Credit Card operates in collaboration with Merchant and Provider Bank.

Whenever a person takes a credit card from a bank, the bank gives the prescribed credit to that person.

Read this articleYou should be aware of when getting a credit card

How to work credit card ?

  • credit cards are used to make purchases or pay bills online in stores. You have to swipe your credit card over the merchant ‘s POS machine to make the payment after purchase.
  • After swiping the credit card, the merchant’s bank is notified and your credit card information is sent to the merchant’s bank.
  • The merchant’s bank then sends instructions to the bank that provided your credit card to approve the transaction.
  • Now your credit card provider bank checks the credit card information and approves the payment if all is correct.
  • After the payment is completed, the money is credited to the merchant’s account.
  • When the payment is successful, the POS machine generates a receipt, which contains information about the payment you made.

You have to pay the credit you used during the month at the end of the month. At that time you get a list, which contains the details of all the payments you have made in a month. You are given some extra time to pay. If you are late in paying the payment, interest is charged at a fixed rate.

If you use credit card and pay bill regularly then you’re credit score increase quickly.

Types of Credit Card available in India

Credit cards are used in many places, like a book airline ticket, book train ticket, cab booking, food order.

#1 Travel credit card

This card is for people who like to go for travel in different places. This card is discounted for Travel Tickets. If you pay with this credit card for booking of train booking, airline booking, bus booking, etc., you will get a certain amount of discount, cashback, redeem points.

#2 Fuel Credit Card

This credit card is affordable for people who are in the transportation business. If you pay with Fuel Credit Card while refueling the vehicle, you get cashback, redeem points. Petrol pumps also offer offers for credit card holders, which you can take advantage of Fuel Credit Card.

#3 shopping credit card

This is a special card for shopping lovers. This card should be worn by people who love shopping. It offers you extra discounts, cashback, redemption points for shopping. There are also vouchers that you can use later.

#4 Secured credit card

People who have a bad credit score or are likely to have a bad credit card should use this card. Using it does not lower your credit score, so it is more likely that you will get a loan if you take out a loan early.

#5 Balance transfer credit card

This card is required if you want to transfer your credit. This credit card will not incur any interest or penalty as it takes 6 to 21 months to repay the credit. One Time Balance Transfer Fee is charged for one credit transfer which can be up to 5% of the amount to be transferred.

Credit card benefits 2022

  • The first advantage of a credit card is that the money used does not go through your bank account. The money is deducted from the amount of credit that the bank has given you. All you have to do is restore the credit at the end of the month.
  • Credit card boost your credit score for each person who uses it which is useful for an individual to get an instant loan from any bank. If the credit card is repaid on time, the credit score stays good and if it is late, it decreases.
  • If you use credit card, then you can take any home appliances on EMI installment.
  • Most credit card users have offers. From the time you swipe your card until it is repaid, you are given some redemption points that you can use at the time of the next repayment.
  • The period given for repayment is interest free, you do not get interest during this period. If you repay within a period of 45-60 days, your chances of getting credit further increase and your credit score also stays good.
  • Credit card fraud is less likely to happen and if it does happen then you have to file a claim with the bank. If the claim is true, the bank will not charge you for the purchase.

Disadvantages of using credit cards as a source of finance

  • If you buy things when you don’t need them, you may end up in financial trouble.
  • Credit cards are considered completely secure transaction way but The potential for fraud is high in the online world.
  • If there is a delay in repaying the credit card amount, the interest rate is very high, so you need pay bill payment on time.
  • If you use a credit card for fuel like petrol, diesel or for payment of train booking, you will have to pay some extra charges.
  • credit card charged small amount on withdrawals, some annual rates apply to credit cards such as annual credit card fees, foreign transaction fees, cash withdrawal fees, etc.

Summary

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Frequently asked questions (faq)

What is a credit cards used for ?

credit cards used for purchase items and withdraw cash with certain limit and interest.

what 4 questions should you ask yourself before using credit to make a purchase?

1. Do you really need the item you want to buy?
2. Is the item you wish buy more expensive?
3. Do you benefit from this item?
4. Is the want shopping items good?

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