CREDIT CARDS INFORMATION

Are you on the lookout for plastic? Whether you are interested in a first or new credit card or looking for a debt-safe alternative via a prepaid card, this is the area to find out more.

        

Credit cards – can you imagine a world without them? Find out all the essential information on this form of payment below.

What is a Credit Card?

The concept of the credit originated in 1887 though the first actual credit card was used in 1920 in the USA. Since then credit cards have become integral to modern economies including India. The card is a small plastic card which holds specific information including a unique card number, the name of the card holder and a signature strip.

How Credit Cards Work

The basic premise of the credit card is that it allows the holder to pay for goods and services all over the world, on credit.

That means they hold a line of credit given by the card issuer and are borrowing money to make purchases. The card holder pays for these via a continuing balance, the debt of which is subject to interest payments.

Credit cards can be used to make purchases in shops, restaurants, for fuel, on the internet and to remove cash from ATM machines. They can be used within India and all over the world, wherever they are accepted.

The majority of credit cards in India are issued by MasterCard® and Visa®.

How is the Card Holder Billed?

The normal billing cycle for a credit card in India is 45 days. Many card issuers offer a so-called grace period. This is a period of time after the card bill is due, before interest is charged. This encourages the card holder to pay off their outstanding debt within the grace period, to avoid paying the interest.

It is a wise idea to pay the minimum card balance each time you receive your credit card bill. Each card provider sets their own minimum payment amount, which is often around 2% of the outstanding balance. Late payments can incur fees, which can become expensive if you also include your interest payments.

How Much Can I Spend?

Every card holder is given a credit limit, determined by the card provider (bank or card issuer). This limit is determined based on your individual status and financial background.

If you have an excellent financial record and high income, you will be given a higher credit limit than if you have existing debts and an irregular income.

Many banks allow you to request a higher credit limit after a specific period, and they may grant this based on a good performance of paying your card bills or an improvement to your financial circumstances.

Interest Rates

Every credit card carries interest rate on the debt. This is known as APR (annual percentage rate) and is calculated on an annual basis. When looking for a credit card, try to choose one with the lowest interest rates.

The Benefits of Credit Cards

Credit cards offer a very practical way of carrying 'money'. Rather than carry lots of cash, you simply need the small card, which allows you to make small and large purchases. Credit cards also allow you to pay for goods and services on the internet – this is impossible with cash. You can also use the same card to pay within India and anywhere in the world.

Credit cards are secure modes of payment – the card is unique to you and if it gets lost or stolen, you can have it replaced quickly. Each payment is recorded so that you can monitor for fraud – and manage your own expenses.

Are there any Disadvantages?

Credit cards can encourage spending money more spontaneously – without afterthought. This can lead to debts, as many people spend too much and are left unable to pay off their bills / balance on time.

Therefore it is wise to carefully consider a credit card before applying. Will you be able to manage the regular card payments? Will you get stuck behind and end up paying interest on your debts?

Take your time and compare as many card offers as you can. There are many to choose from!

        


Please Note: www.whichwaytopay.in is not authorised to give advice under Indian financial regulations.

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