Also referred to as plastic money or just plastic, credit cards are an easy and convenient way to make payments and build credit. Today, they are universally accepted, having more or less become an indispensable part of a modern lifestyle.<\/p>\n\n\n\n
While most of us broadly know what a credit card is, many aspects of its usage remain shrouded in confusion and mystery, leading many to believe that a credit card does more harm than good. Here\u2019s everything you need to know about credit cards, from how they work to how you can deploy them to your advantage.<\/p>\n\n\n\n
A credit card is a type of payment card issued by a bank or financial services company in which cashless transactions are made against a line of credit. Akin to a short term loan or advance, a credit card enables you to make purchases using the credit card issuer’s money. This is why every card comes with a set credit limit i.e. the total amount of credit that the bank is willing to lend you. If you try to exceed this upper limit, your transaction may be rejected by the credit card issuer.<\/p>\n\n\n\n
Every month, you will get a statement from your bank giving you a list of all the purchases you made along with the total amount you need to pay, the minimum amount due, and date by which you need to pay. If you pay your credit card bill on time and in full without carrying any balance forward into the next billing cycle, you are not charged any interest.<\/p>\n\n\n\n
There are several fees and charges associated with a credit card. To begin with, there is an annual maintenance fee. If you pay your credit card bill late, late payment charges are levied. Withdrawing cash from an ATM using your credit card typically attracts a steep fee. Additionally, using a credit card on your travels abroad can be rather expensive as foreign transactions usually involve a foreign currency mark-up fee which is charged as a fixed percentage of the transaction amount.<\/p>\n\n\n\n
Credit cards offer a variety of benefits. The most important ones are as follows:<\/p>\n\n\n\n