How Much Do You Know About Credit Cards? |
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Credit cards have brought a revolution in the money market. This humble plastic card has won the hearts of millions worldwide. Let's take a deeper look into the world of plastic money, better known as credit cards. What Actually Are Credit Cards? A credit card is a sort of smart card that enables you to borrow money in order to make payments for purchases or other things. There is a limit to the amount of cash you can spend on your card. It is known as credit limit. As each month ends, you have to pay off the balance either in whole or a minimum repayment. Advantages of credit cards You cannot imagine the benefits you get by carrying around this piece of plastic in your wallet. Here are some of them: With a credit card in your pocket, you need not take the risk of carrying bundles of notes in your wallet. As a credit card holder, you can enjoy shopping on the internet! Credit cards make shopping abroad a pleasurable experience, as you need not worry about issues like local currency. With a credit card, you can divide a large payment into small parts and pay them in several months. A credit card is your best friend in times of emergency, such as a sudden breakdown of your car or medical emergencies. Choosing A Credit Card Before making the final choice of a credit card, go through the terms and conditions critically. If you do not understand the terms, ask your issuer. Never sign up with half a knowledge. There's a little trick played by the credit card companies. They put up all the plus points of the card in large print so that it is readily noticed while the minus points are hidden somewhere in small print. So, look hard to pick out the negative points. Credit Card Terms That You MUST Know Annual Percentage Rate (APR) You might have heard a lot about this. APR is the interest rate charged on your outstanding balance. Special Introductory Rates Some companies offer a very low or zero per cent interest rate for a certain period of time (usually up to 6 months) while issuing the credit card. However, they may charge a higher interest rate for cash withdrawals. Balance Transfer Rate The credit card companies may provide you a much lower interest rate if you switch your balance from another card to the one issued by them. Interest Free period Before using your credit card, find out when interest payments will start. Do you have to pay interest from the date you purchase or do you get certain number of days as interest free period before you start paying? Generally, there is no interest free period on cash withdrawals. Cashback and Rewards Some credit card companies offer rewards or "points" for every dollar you spend on your card. However, do not jump into taking them. See if they are really useful to you. Say, it's useless to collect air miles if you are not a flier. Annual Credit Card Fees The card issuer charges certain fee each year for utilizing their credit card. However, not all cards come with an annual fee, so do some research before purchasing the one for you. Late Payments If you pay late, you will have to pay an extra charge, along with the interest owed. At times, the charge may be higher than the amount you owe. Going Beyond Your Credit Limit There is a extra charge for exceeding your credit limit too. So, watch out your expenses! Owning a credit card is a matter of freedom with responsibility. |
