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What is a credit card

What is a credit card

The credit card is one of the most popular banking products. It is often mentioned in soap operas, movies, and even modern literature.

Some people even confuse a credit card with a debit card and are very surprised when they find out what different terms of use these two types of bank cards have.

In this article, we will talk about what a credit card is. We’ll find out if it’s a scam or a real helper for all occasions and look at all the nuances of using a credit card from different angles.

Credit card: what it is and how to tell the difference from a debit card

Basically, you’ve probably already guessed that if the card is a credit card, it’s associated with credit – that is, borrowing money from the bank. Whereas with a debit card you spend your own money, when you shop with a credit card you’re disposing of the bank’s money. And you have to pay it back, just as you would with an ordinary consumer credit.

A credit card is a payment instrument, which allows you to make purchases in stores, supermarkets, cafes, gas stations, and even on the Internet at the bank’s expense.

Credit cards usually have a certain limit. This means that you cannot spend more money than your agreement with the bank states.

You also have to pay back all the money you spent. Sometimes with interest, sometimes without interest. This is determined by the grace period. If you pay the money back on time, there is no interest. You pay back the amount you borrowed.

If, however, you overstayed the grace period, you will have to pay back the debt with interest. This interest is determined individually by each bank and is specified in the contract.

Any credit card user should know this

There are a lot of unfamiliar terms in a bank contract. If the credit card user does not understand all of them, he can be in a lot of trouble. All the basic terms and their meanings in a simple form will be down below.

Settlement, payment and grace period

During the charge period the user can spend money from the credit card within the fixed limits.

After that comes the repayment period, i.e., the time during which the client has to repay the credit. If he does so, no interest is charged. That is, the user pays the bank exactly the amount he borrowed from the bank.

A grace period is a billing period + a payment period. That is, the time during which you spend the money and pay it back.

Issuing bank

The issuing bank is the bank that issues your credit card and puts the funds into circulation. It is responsible to credit card users and commits to provide money up to a set limit.

Credit limit

A credit limit is the maximum amount of money a client can spend with his credit card. The limit is written in the contract and depends on the solvency of the user and the conditions of the bank.

As a rule, each user has his own credit limit. When determining it, the salary, length of service, credit history and some other things are taken into account.

Line of Credit

This is a contract that spells out the bank’s obligation to give the user money in a certain amount. When you apply for a credit card, you also conclude a similar agreement. It reflects all the conditions of granting funds.

Credit cards usually have a revolving line of credit. This means you can pay the bank back in installments or in full at your discretion.

It also means that your credit limit will increase all the time. The longer you use your credit card, the higher your credit limit will be.

Conclusion

A credit card is a very convenient payment tool that can benefit you when used correctly.

If you read all the terms and conditions carefully and pay on time, the credit card will become an indispensable helper in everyday life.

The answer to the question: “cheat or helper” – everyone will find himself. The answer to the question “cheating or helper” will be found by each person. Some people will consider the credit card a hellish universal evil, while others have long ago learned how to use it and everything suits them.

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