What is a Credit Card?

Every second person has different types of financial problems in today’s lifestyle. Credit cards have been serving different financial needs for many years. Not only can you borrow, but you can get further discounts and offers with each transaction..

Credit cards have become very handy nowadays as a large number of people have started to use credit cards instead of cash or any other method. And thus, it has become essential to have complete knowledge of what a credit card is and how it is used.

How credit cards work?

Credit cards are issued by the financial institutions on some terms and conditions agreed by the holder. Once the credit card has been issued, the cardholder uses the card to pay their bills and has to repay the amount later within the given due date. A minimum amount is required to be repaid before the due date and the rest of the amount can be paid later in the following month but with the interest rate amount. If the credit holder pays the whole credited amount by the due date, no interest is imposed. The credit card has a limit set by the issuer. The limit is decided based on the card holder’s credit score and history. The limit is higher as the credit score increases and the history is better. Credit cards are just like any debit card or ATM card. The only difference is that while using a debit or ATM card, the amount gets deducted from your savings, whereas credit cards are like loan providers. The holder does not have to instantly pay from his savings.

Types of credit card

There are different types of cards. Go through the following list, compare all credit card and select the best for you.

Reward cards: There are cards that provide cashback, miles and points on purchases that lie in the reward card category.
0%APR cards: There are many cards that provide interest-free finances for a period of time known as APR card.
Business card: Business cards give a reward on travel and shopping to the cardholder.
Secured cards: Secured cards are a good choice for credit newbies or for those who have bad credit. These types of cards are just regular as others. The difference is just that the cardholder has to deposit some amount to get the line of credit.

Advantages of credit card

All the things have both pros and cons to them. The usage of credit cards has a wide range of positive points.

The holder can pay for any instant purchase and repay the amount later.
Various reputed firms and companies provide discounts on the payment from a credit card.
The cardholders also earn some rewards on purchases sometimes.
Most importantly, it is an easy and more flexible way of paying as the cardholder doesn’t have to worry about carrying cash or having money in their current account to pay for anything.
Having a credit card surely benefits in an emergency or urgent situation where a large sum of money is required as the cardholder can pay the tedious amount at that particular time and does not have to go through the hassle of paperwork for getting a loan. It saves both time and energy as it provides an instant amount.
Credit cards can also help in increasing the credit score. The cardholder just needs to repay on time and keep a low balance on the card.
In addition to that, credit cards also come with the provision of limited liability from fraudulent charges if one’s card gets stolen or gets misplaced.

Few things to remember

When using a credit card, the holder should always be careful to plan repayment strategies to not fall into pits of debts.

All institutions provide different services on credit cards for different purposes and the interest rate on credit card is different in every institution.
Pay the minimum amount before the due date and keep track of all the purchases or payments that you made to not exceed the limit of the card.
Always keep your credit card in a safe place and do not leave it open in a place where the risk of misplacing is high.
If by any chance your credit card is stolen or misplaced make sure to inform the institution and cancel the card.
Your credit card information is kept private, encrypted, and secure with the issuer and one should not share the card details with anyone else to prevent getting caught in a fraud situation.

Thus, while applying for a credit card one should compare all credit card from different institutions then choose the one which suits their needs and fulfills their requirements.

Compare all credit cards and choose the best suitable option for you for the best benefits. Every credit card has its own benefits in different fields, such as some are best for traveling, while some are good for shopping. Compare all pros and cons and after analyzing your requirements, go for applying the one. Use a strategic approach to manage your expenses and source to have a safe and beautiful future.