This article will provide you a crisp idea, "why you should have a credit card". A credit card, typically issued by a financial institution like a bank, is a plastic card enabling the cardholder to borrow funds for purchases or services. It serves as a widely used and convenient payment method, extending a line of credit to the user. When utilizing a credit card for a transaction, one essentially borrows money from the card issuer and is obligated to repay the borrowed amount within a specified period, usually on a monthly basis.
Key characteristics of credit cards encompass:
Credit Limit: The maximum amount that can be borrowed using the credit card, determined by the card issuer based on factors like creditworthiness, income, and financial considerations. You can also modify, increase or decrease your limit any time within the permissible limit provided by the service provider.
Interest Rates: If the full balance is not paid by the due date, the remaining amount accrues interest. Credit cards often feature variable interest rates, which may be relatively high compared to other credit forms. One major point here is that the in case of non-payment the interest charged is immensely high and charged on per day basis.
Grace Period: Many credit cards provide a grace period, typically spanning from 21 to 25 days after the billing cycle ends, during which the borrowed amount can be repaid without incurring interest charges.
Fees: Various fees, including annual fees, late payment fees, and cash advance fees, may be associated with credit cards. Awareness of these fees and card terms is crucial. Read the charges schedule attached with the card carefully.
Rewards and Benefits: Some credit cards offer rewards programs, cashback, or perks such as travel rewards, discounts, or redeemable points for merchandise and services. You can book flights, travel tickets, hotels. With redeemable points you can also shop or convert them in cash (in specific facilitator case like HDFC).
Security Features: Credit cards commonly include security features like fraud protection, zero-liability policies, and the ability to dispute unauthorized transactions.
It is imperative for cardholders to use credit cards responsibly, managing expenditures within their means, and ensuring timely bill payments to avoid accumulating debt and facing high-interest charges.
Advantages of Credit cards
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| Advantages of Credit Card Bifurcation |
Credit cards provide several advantages when used responsibly, including:
Convenience: Offering a hassle-free way to make purchases without the need for large amounts of cash, credit cards are widely accepted globally, facilitating online shopping and travel.
Building Credit History: Responsible credit card use, such as timely payments, contributes positively to one's credit history, essential for favorable terms on loans and mortgages.
Building Credit score: Use of credit card helps you to build your credit score and enhance your Credit rating, CIBIL score. Which helps to get better future finances at economic rates. To understand better go my specific blog Taxolawgy With Priyanka Tiwari: Credit Score
Emergency Fund: Serving as a financial safety net during unforeseen expenses, credit cards offer quick access to funds in times of need.
Rewards and Perks: Many credit cards feature rewards programs, providing benefits like cashback, travel rewards, and various perks, enhancing the overall cardholder experience.
Security Features: With fraud protection, zero-liability policies, and dispute mechanisms, credit cards offer security layers for transactions.
Grace Period: The grace period allows interest-free use of the credit card if the balance is paid in full each month.
Building Financial Discipline: Managing a credit card entails budgeting, timely payments, and understanding credit terms, fostering responsible financial habits.
Travel Benefits: Certain credit cards offer travel-related advantages, including insurance, rental car coverage, and airport lounge access, enhancing the travel experience. People mostly enjoy the lounge access at airports the most.
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