Perfect Info About What Is Credit Card ?

What Is Credit Card :

We have seen a lot of credit cards, many people also use them like this. But do we know what it is and why it is used? So let’s know today what is a credit card.

Hello friends, In this article, we will learn everything about credit cards. You don’t need to read anything else after this. At least for the credit cards. We will cover all the questions like what is credit card? benefits of credit card, advantage and disadvantage of credit card. Who can use credit card, types of credit card. What precautions are to be taken while using credit card. What to be avoided, types of credit cards, payment network providers and so on. So let’s get started.

List for What Is Credit Card?

What is a credit card?

A credit card is a payment card that allows the cardholder to borrow funds from the issuer up to a certain limit in order to make purchases or withdraw cash. The cardholder is then required to pay back the borrowed funds within set days by issuer.

If we delayed to pay, pay along with interest and any other fees. Credit cards are typically issued by banks or other financial institutions and can be used at a wide variety of merchants. At least you know what is credit card?

Okay, now you know what is credit card, so lets see its benefits.

What are the benefits of credit cards?

10 benefits of credit cards : What Is Credit Card

Cash advance: Credit cards allow us for cash withdrawals, which can be useful in emergency situations. We can easily borrow cash by using credit card as your debit cards, up to certain limit.
Convenience: Credit cards allow for easy and convenient purchases, both in-person and online. Most of the banks are offer descent discount for using their cards.
Building credit: Responsibly use of a credit card can help us to build a good credit history and improve a our credit score. Which will helps to future loan application.
Interest-free financing: All credit cards issuer’s are give offer of interest-free financing on purchases, as long as the balance is paid off in full each month.
Rewards and benefits: Most credit cards offers reward, such as cash back, instant discount, miles, or points on purchases. Some cards offer purchase protection and extended warranties to attract the customers.
Large purchase: Credit cards can be used to make large purchases that may not be possible with cash or a debit card. Some banks are giving good credit limit as well. So it is very helpful to purchase expensive goods.
Renting a car or booking a hotel: Credit card is usually required for these services, where we can get a good discounts.
Online shopping: Credit cards are commonly accepted for online shopping, online movie, bus, plane tickets, b and making it an easy and secure way of purchase.
Emergencies: Credit cards can be a useful tool for handling unexpected expenses or emergencies. This is a good option in such conditions. Easily available EMI facilities, we can convert our big spending in small pieces and manage our big expenses easily.
Tracking expenses: Credit card statements provide a record of all purchases for that statement period. It will be useful for budgeting and expense tracking for further.

In all there are many other benefits like airport lounge facility, specific offer on big sale. Extra reward points. Additional gift vouchers for extra spending etc.

Of course where there are benefits there are also drawbacks, let’s see some drawbacks too, and understand what is credit card.

Drawbacks of credit cards

Disadvantages of credit cards, this will help you to understand what is credit card.

High interest rates: Credit cards often have high interest rates, if you carrying your spending balance to next cycle.
Fees: Many credit cards provider charging fees such as annual fees, late payment fees, up gradation fees, and cash advance fees.
Temptation to overspend: Credit cards can make it easy to overspend, especially if a person does not have a budget or plan for how to use the credit. So is very important point, if you are using credit card or planning to apply it.
Debt: If you not managed your debt properly, credit card debt can quickly spiral out of control and become overwhelming, as it has very high interest rate.
Credit score: Late payments or carrying high balances can negatively impact on your credit score or cibil score.
Fraud: Credit card fraud is a common problem, and it can be difficult to resolve it. Even it resolve it takes lot of time-consuming to resolve.
Minimum payments: Paying only the minimum balance on a credit card can prolong debt and incur more interest. This is more complicated to understand and rate of interest is too high. It is included on the total outstanding, the balance of last month amount, current month outstanding and if you have any purchase on EMI that outstanding balance.

Better to pay full amount or convert your outstanding in EMI more convenient and more attractive.
Higher prices: Some merchants charge higher prices for credit card transactions, which can add up over time, service tax or convenience fees.
Complex terms and conditions: Credit card agreements often have complex terms and conditions that can be difficult for consumers to understand. Written in very small text and very complicated financial language.
Limited acceptance: Credit cards are not accepted everywhere, which can be a problem in remote areas or in certain businesses.

After understanding what is credit card, it’s benefits and drawback, lets know who can use this?

Who can use a credit card:

Generally, credit cards are intended for use by adults who are at least 18 years of age or older. To be eligible for a credit card, an individual typically needs to have a steady income and a good credit history. In financial term that your cibil score should be descent.

Many credit card issuers also require applicants to have a social security number or taxpayer identification number. Some credit card issuers may also have additional requirements such as a minimum income or credit score.

It’s worth noting that, in some countries, the legal age to apply for a credit card is 21. In addition, some credit card issuers may have different requirements for students and young adults, such as a co-signer or proof of income.

It’s important to understand that credit cards are a form of credit and they should be used responsibly. If an individual is not able to handle the responsibility of credit card usage, it’s recommended to avoid applying for one.

Okay fine, now know more about credit card right, and also know the applicable criteria. Let’s know the type of credit cards before apply it.

Types of credit cards:

Know General type of credit cards after know what is credit card.

There are several types of credit cards available, each with its own unique features and benefits. Some of the most common types of credit cards are covered below:

Rewards credit cards: These credit cards offer rewards such as cash back, miles, or points for purchases made with the card. Some times there are offer to spend specific limits to get maximum rewards points.
Cash back credit cards: These credit cards offer cash back on purchases, usually a percentage of the purchase amount. Of-course there are conditions of limit of cash-back, limit of purchasing amount and so on.
Travel credit cards: These credit cards offer rewards and benefits geared towards travel, such as free checked bags, priority boarding, and travel accident insurance, free airport langue facility like.
Balance transfer credit cards: These credit cards allow cardholders to transfer high-interest credit card balances to a card with a lower interest rate, often with a promotional 0% introductory rate. Select very carefully and check all conditions before apply.
Secured credit cards: These credit cards are designed for people with limited or poor credit history, and require a security deposit to be made as collateral.
Student credit cards: These credit cards are designed for students and often have lower credit limits and less stringent approval requirements. Overall good for students who live away from parents.
Premium credit cards: These credit cards are designed for high-income individuals and offer a wide range of benefits such as concierge service, travel insurance and access to exclusive events. Also charge fees for that.
Small business credit cards: These credit cards are designed for small business owners and offer rewards and benefits tailored to business expenses. Higher credit limit with good benefits.

So these are not the only types of credit cards available and new types are continuously being introduced by banks, NBFC to attract the users. It’s important to compare the benefits and fees associated with different types of credit cards. Find which one is good for you and provide maximum benefit in less fees or most probably free before applying for one.

Okay friends, I think you are very well understand the credit card. You know the types but its very difficult to select from it. Let’s check some point to select better one.

Selection of credit cards:

Let’s check which credit card is best for us:

The best credit card for a common person will vary depending on their individual financial situation, his needs and requirement. However, some credit cards that are generally considered to be good options are mentioned below:

Cash back: Those credit cards offer cash back on purchases, usually a percentage of the purchase amount. They are a great option for people who want to earn more rewards on their everyday spending. Offering movie, bus tickets on discounted price.
Low interest: Those credit cards have low interest rates, which can be beneficial for people who carry a balance on their card.
No annual fee: Those credit cards do not have an annual fee, which can be beneficial for people who do not want to pay an additional fee on top of interest charges. Those are not using credit cards often, this one is good option even they not use for a year.
Balance transfer: Those credit cards allow cardholders to transfer high-interest credit card balances to a card with a lower interest rate, often with a promotional 0% introductory rate.
Secured credit cards: Those credit cards are designed for people with limited or poor credit history, and require a security deposit to be made as collateral.

It’s important to compare the benefits and fees associated with different types of credit cards before applying for one, and to choose one that aligns with your personal financial goals.

Now one question is raised in your mind that why banks are giving offers on it. Don’t worry let’s check the answer.

Why banks giving offers:

Why banks giving offer on credit card :

Banks and other financial institutions offer various types of incentives and rewards on credit cards to attract new customers and encourage existing users to use their credit cards more frequently. Let’s try to find the reason behind this, why they may offer these promotions:

To Increase customer acquisition: Banks and financial institutions use credit card offers to attract new customers to increase their customer base.
Increase customer usage: They also use credit card offers to encourage current customers to use their credit cards more frequently. This can increase the amount of fees and interest they earn from the customers. More customer means more probability to carry outstanding, more options to get high interest.
Building Brand: They use offers as a way to build their brand and create a loyal customer base.
Establishing a relationship: They use offers to establish a relationship with their customers, which can lead to additional financial products and services. May be for personal loan, car loan, housing loan or any other. This a one of way to collect fruitful customer base.
Data collection: Credit card companies collect data on customers’ spending habits, which can be used to target their marketing efforts and improve their products and services. To sell insurance and tie-up merchant services.
Competition: They also offer credit card offers to stay competitive in the marketplace. This activity make them self to show their presence in the market.

Overall, credit card offers are a way for banks and financial institutions to attract and retain customers, increase usage, and generate revenue through interest, fees and relevant services.

Let’s understand how the credit cards transaction are work.

How credit card works:

Let’s under how credit card works in background, what is credit card functions.

When you use a credit card while you purchase and make a payment, the following process takes place in the background:

Authorization: The merchant submits the purchase information to the credit card network (such as Visa or Mastercard), which then sends the request to the issuing bank (the bank that issued your credit card) for authorization.
Credit check: The issuing bank checks your credit to ensure that you have enough credit available in your account to make that transaction.
Approval or denial: If your credit is approved and you have enough credit available, the issuing bank sends an approval message back to the merchant. If your credit is not approved, the issuing bank sends a denial message.
Payment processing: If the transaction is approved, the merchant receives the payment from the credit card network and the funds are transferred from the issuing bank to the merchant’s bank account.
Billing: The issuing bank will then send you a statement of your credit card charges, including the purchase amount, any interest or fees if any, and the due date for the payment.
Payment: You will then have to pay the bill, either in full or in minimum payments as per the terms of your credit card agreement. As we seen before you can convert it in easy EMI. Most of the banks are offering this facility.
Credit score: Your credit score may be affected by the credit card usage. The payment history, credit utilization, and other factors are taken into account to calculate the credit score.

It’s important to note that the process may vary slightly depending on the type of credit card, the merchant, and the network of credit card. Additionally, some credit card companies may also use other methods to verify your identity, such as a fingerprint or facial recognition, before approving a transaction.

Hello friends, we almost covered every thing. Now see is credit card beneficial for bank or user it means customer, let’ see.

Is credit card beneficial for User or banks:

Credit cards can be beneficial for both the user and the bank in different ways. Know more about what is credit card and it beneficial feature for us

For the user:
⧫ Credit cards can provide convenience and flexibility, allowing them to make purchases and withdraw cash without having to carry large amounts of cash.

⧫ Credit card usage can also help to build a positive credit history and improve the user’s credit score, which can make it easier to obtain loans in the future.

⧫ Many credit cards also offer rewards and benefits such as cash back, miles, or rewards points for purchases.

For the bank:
⧫ Credit cards can be a profitable source of revenue.
⧫ Banks earn money from the interest charges on outstanding balances, as well as from fees such as annual fees, late payment fees, and cash advance fees.
⧫ Credit card usage also allows the bank to gather data on the user’s spending habits, which can be used to improve their products and other services and target their marketing efforts to make their other business.

So its important to remember that credit cards can also be a source of financial trouble if not used responsibly. It’s important for the user to use credit card responsibly and be aware of the terms and conditions associated with the card. Here we know that what is credit card does for us and banks.

What precaution to be taken for credit card:

There are several precautions that can be taken to protect your credit card and ensure responsible use:

Keep your card information secure:
Always keep your credit card in a safe place and never share your card information with anyone. Be sure to shred any pre-approved credit card offers you receive in the mail, and be aware of the latest credit card scams.
Use a strong password:
When shopping online or using your card over the phone, always use a strong password to protect your account information.
Monitor your account:
Check your account regularly to ensure that all transactions are legitimate and to catch any fraudulent activity early.
Use a credit card with a low credit limit:
Try to get a credit card with a low credit limit. This will prevent you from overspending and keep your debt manageable.
Pay your bills on time:
Late payments can lead to late fees and interest charges, and can also hurt your credit score.
Use your credit card only for emergency:
Use your credit card only in case of an emergency, and don’t use it to make impulse purchases.
Keep track of your credit score:
Keep track of your credit score and work to improve it. A good credit score can help you get better credit card offers and lower interest rates.
Do not use too many credit cards:
Having too many credit cards can be overwhelming, and it can be difficult to keep track of all the balances and payments.
Set the limits:
Set the limit for online spending, domestic spending, offline spending. Most of the banks offer this facility. It will help you to control you spending as well as miss use of card.
Notify your issuer if you lose your card or suspect fraud:
Notify your issuer immediately if you lose your card or suspect fraudulent activity on your account, so that they can take the necessary steps to protect your account.

By taking these precautions, you can protect yourself from credit card fraud and ensure responsible use of your credit card.

What is best way to use credit card:

The best way to use a credit card is to use it responsibly and within your means. Some ways to use a credit card responsibly are:

Paying off the balance in full each month:
This will help avoid paying interest charges and keep your debt manageable.
Sticking to a budget:
Having a budget can help you keep track of your spending and avoid overspending.
Using the card for emergencies only:
It’s best to use a credit card only for emergencies or unexpected expenses, and not for impulse purchases.
Choosing a card with a low interest rate:
A card with a lower interest rate will make it less expensive to carry a balance.
Taking advantage of rewards and benefits:
If you have a rewards credit card, make sure you take advantage of the rewards and benefits offered by the card.
Paying on time:
It’s important to pay your credit card bill on time to avoid late fees and to protect your credit score.
Monitoring your account regularly:
Regularly monitoring your account will help you catch any fraudulent activity early and ensure that all transactions are legitimate.
Notifying the issuer if you suspect fraud:
If you suspect that your credit card has been compromised, contact your issuer immediately.

By using your credit card as responsibly, you can enjoy the convenience and benefits of credit card usage while avoiding the potential downsides. Remember that credit cards are a form of credit and should be used with caution, only when you are ready for the responsibility that comes with it.

Okay friend we have seen a lot information about credit card, now we conclude the over all and finish the chapter.

Conclusion of credit card:

In conclusion, credit cards are a convenient and flexible form of payment that can provide many benefits such as rewards, purchase protection, and interest-free financing. However, credit cards can also be a source of financial trouble if not used properly and responsibly.

High interest rates and fees can make carrying a balance on a credit card expensive, and if not managed properly, credit card debt can quickly spiral out of control. Therefore, it’s important to use credit card responsibly, pay your bills on time, stick to a budget and only use it for emergency.

It’s also important to choose a card with a low interest rate, monitor your account regularly, and take advantage of the rewards and benefits offered by the card. By using your credit card responsibly, you can enjoy the convenience and benefits of credit card usage while avoiding the potential downsides.

I hope you liked this information about credit cards, that you understood it and it helped you in choosing your credit card. If you really found this information useful, please share it with your loved ones, thanks a lot for you valuable time!