CREDIT CARD
A credit card is a payment card issued to users as a system of payment. It allows the cardholder to pay for goods and services based on the holder’s promise to pay for them. Credit cards were first introduced by travel agencies and the idea was later picked up by banks. They are made of plastic material and therefore called ‘plastic money’. A card issued by a financial company giving the holder an option to borrow funds, usually at point of sale. The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.
In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest being charged. A credit card also differs from a cash card, which can be used like currency by the owner of the card. A credit card differs from a charge card also in that a credit card typically involves a third-party entity that pays the seller and is reimbursed by the buyer, whereas a charge card simply defers payment by the buyer until a later date.
TYPES OF CREDIT CARD
1. Travel Credit Card - Earn redeemable reward points, complimentary access to VIP Airport Lounges, and discounts on airline, bus, and rail tickets with a travel credit card.
2. Fuel Credit Card - You can reduce your total transportation costs by saving on your fuel expenses throughout the year with a fuel credit card and get fuel surcharge waivers.
3. Rewards Credit Card - Earn accelerated and redeemable reward points to enjoy discounts on specific transactions or purchases.
4. Shopping Credit Card - Get cashback and discount vouchers by shopping at our online and offline partner stores with shopping credit cards.
5. Business Credit Card - Business credit cards are helpful in meeting expenditure in order to expand or grow the business. Some of the best business credit cards in India.
6. Student Credit Card - Targetted at college students, student credit cards are an ideal tool for meeting college-related expenditures. Students above the age of 18 years can apply for these kinds of credit cards and enjoy features such as rewards, interest-free periods, and immense discounts.
7. Cashback Credit Card - Cashback credit cards offer cashback ranging from 5-20% on transactions made through the credit card. These cards usually offer fuel surcharge waivers, rewards, reversal of annual fees, etc.
8. Lifestyle Credit Card - The benefits of lifestyle credit cards are curated to ensure maximum savings while using these credit cards. These cards usually offer rewards, discounts, and other benefits on shopping, dining, and even travelling.
9. Entertainment Credit Card - Entertainment credit cards are best used for availing discounts, rewards, and other benefits on movies, dining, golf, or even travel.
10. Shopping Credit Card - Get cashback and discount vouchers by shopping at our online and offline partner stores with shopping credit cards.
Features of Credit Card
• Alternative to cash.
• Credit limit.
• Aids payment in domestic and foreign currency.
• Record keeping of all transactions.
• Regular charges.
• Grace period or grace days.
• Higher fees on cash withdrawals.
• Additional charges for delay in payment.
• Bonus points.
• Gifts and other offers.
Advantage of Credit Card
Credit cards allow the buyers to use the card for the purchases and pay for the same later. You do not need to worry about having enough cash in their account as at the time of payment the money is not going out from your account. Hence, it eases the worry of denting the account balance.
Credit cards help you build a credit history which helps your credit score. Timely payment of the credit card balance increases your credit score. Banks and financial companies check your credit history and your repayment habit before lending you a loan. A good credit score improves the chances of loan approval.
Many credit card companies give their buyer insurance in case their purchase that has been made through the credit card is lost or stolen. Other types of coverage like air accident insurance, overseas medical emergency insurance, lost card liability cover, etc. are also offered.
Credit can help you keep the track record of your spending habits. Every month a statement is sent to you to check your spending. It can also help you analyze where to limit your expenditure. Some companies also send you yearend summaries which help do taxes.
Disadvantage of Credit Card
Most often buyers can go overboard with their spending and can land in massive debt at the end of the month without even realising it.
No matter how many facilities and offers your credit card provides, there will always be hidden costs like cash advance fees and late payment fees that a lot of credit card customers do not know about.
If you fail to make your credit card payment on time, then the balance is carried over to another month and interest is charged on the outstanding balance. After your interest-free period is over, the bank can charge up to 3% for your outstanding payment.
Just like your money, your credit card details can be stolen. It is also possible for you not realise that such fraudulent activity has taken place till you check your monthly statement. In case your credit card has been stolen, you can call your credit card company and ask them to block the card. If you find that the card has been stolen much later, the credit card companies charge you a minimum amount before deactivating the card.
There is a good part and a bad part to almost everything. Though credit cards come with certain fees and charges, they can go a long way in building your credit score if used wisely.
Reference
Debit Card - Definition, types, features, advantages and disadvantages 2022
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