Advantages Of Credit Card
Ease of purchase - Credit cards can make it easy to do shopping. If you don't want to carry cash with you or if the merchant establishment doesn't accept cash purchasing then making purchasing by using credit card can make shopping a memorable experience.
Availing free credit period- With credit card offers, you can get a free credit period of 50-55 days, from the billing date which in turn helps in purchasing on credit without any need to carry cash.
Online shopping- By using the credit card, you can purchase products/services online or over the phone, and can enjoy 24x7 shopping experience. Benefits of varied branding offers- Credit card gives varied exciting discounts and schemes which are connected with entertainment, dining, travel, shopping, etc. Banks tie up with reputable brands to offer products/services at lucrative discounts.
Withdrawing cash by using credit cards: It is possible to use credit card at ATMs for withdrawing cash.
Reward points- By using credit card, you can earn reward points on purchasing which can be accumulated and redeemed later for attractive gifts, etc.
Eligibility Criteria To Get A Credit Card
- Minimum age of the applicant should be 18 years.
- Maximum age of the applicant can be 70 years.
- The salaried person should have minimum annual salary of Rs 1,80,000. Whereas, for self-employed person, it is 1,40,000 per annum.
How To Compare Credit Cards?
There is a plethora of credit card options available in the market, which can simply clutter the whole process of selecting the credit card. So, it is necessary to evaluate all card features on the basis of below points:
Rate of interest: Credit card companies levy interest rate, whenever you will revolve your outstanding balance into the next billing cycle. It can range from 2.79 per cent - 3.9 per cent, varying from one card issuer to other. You should select that bank which is offering lowest interest rate.
Identify a credit card in accordance to your requirements: You should search for a credit card which serves your varied requirements. Moreover, the areas of your expenditure should match with the type of the credit card. For instance, if you are the global traveler then you should look at such a credit card which can be used for paying varied expenses in foreign currency and also offers 24-hour travel bookings around the world.
Annual fee, joining fee & varied other features: You should closely review all features of available credit cards. You should make sure that the credit card is offering maximum features like zero annual fees, zero joining fee, good reward points, etc.
Grace period: It is the period during which banks don’t levy any charges. It is the period which is between the statement date and the due date of payment and usually varies between 15 to 20 days. You must select that credit card which is providing maximum grace period.
Rewards and lucrative offers: There are varied credit cards which have a reward structure and are offering lucrative rewards in the form of flier points while shopping for a particular goods/services. It is possible to redeem these points for attractive gifts & varied cash back offers. Different credit card companies are offering certain credit cards which charge high annual fee and offer exciting services, such as hotel accommodations, concierge services, worldwide travel bookings, etc.
Parties Involved In Credit Card Process
Credit card holder: It is the person to whom the credit card is actually issued. He buys different things by using the card and pays back the borrowed money later within the scheduled time frame to the bank.
Merchant: It is the person who will accept the payments from the credit card holder by swiping of the credit card. Card issuing company: It is the bank which has issued the credit card and gives credit to them on transactions which are made by the credit card holder.
Acquiring bank: All credit card transactions are done through the acquiring bank. The merchant will pay a fee to the acquiring bank for signing of machine and for varied other services.
Credit card network: It is the network which helps in facilitating the card transactions, like Visa or Master Card.
Balance transfer in credit card
It is the process of transferring the current outstanding balance or debt from one credit card to another card.
How does balance transfer benefit?
It benefits the credit card holders when there are high interest rates on their current cards as against the other credit card on which the balance has to be transferred. Such kind of facility can be availed by those who are not satisfied with the services of their current credit card company, like incorrect billing, non-receipt of the credit card bill, etc. By switching from one credit card to another, the card holders can enjoy low interest charges along with other services.
Mostly, banks give low interest rates or even zero interest on balance transfer on credit cards. However, it should be noted that these rates are applicable only for initial period, say for 3-4 months. After that, bank will start charging the same interest rate what your earlier credit card company was charging from you. It should be noted that transferred amount should not be more than 80 per cent of the credit limit.
Safety Measures To Be Taken While Using Credit Card
- Always sign your credit card as soon as you will get it.
- You will get the PIN number after a few days from the credit card company. You should keep your PIN/account number at a safe place. Whenever, you are using the credit card, you should be aware of when your credit card is being swiped by the shopkeeper in order to make sure that there is no misuse of the card.
- While making payment with your credit card, you should make sure that it is your credit card that the shopkeeper has returned back to you.
- Make it a habit to verify your purchasing with your billing statements.
- Never throw your receipt behind after using the credit card at an ATM.
- Do not discard credit card statements or receipts that bear your PIN or account number. You should either shred them or burning them would be a useful technique.
- Never provide details of your credit card over the phone, unless you are pretty sure that you can completely trust the other person. The same goes while making purchasing online.
- You should save receipts of payments which you have made through credit card and should carefully check monthly statements in order to find out any billing errors.
- If your credit card gets damaged then you should completely destroy it and request the card company to issue a duplicate credit card.
- If you have lost your credit card then you should immediately inform the credit card company and should also lodge a police complaint.
Components Of Credit Card Bill
It is the date on which the credit card company will prepare the bill. A statement of the purchases during one billing cycle will be created by the credit card company and it will be mailed to you on the same day.
Billing cycle and billing date
The billing cycle can be defined as the period between two statement dates and it usually has 30 days. On the billing date, all the purchases which you have made by using the credit card during the previous 30 days will be added and sent to you.
Payment due date
It can be called a day on or before which your payment should reach to the credit card company. Otherwise, the card issuer will levy late payment fees, which can vary anywhere between Rs 300 or 30 per cent of the minimum amount due, whichever would be more. If you will miss your payment due date then you will be liable to pay a minimum late payment charge of Rs 300.
Total due amount
It is the total amount which is due on you and you have to pay to the credit card company. For instance, if you have made purchasing worth Rs 12,000 in March by using your credit card and paid only Rs 10,000 before the due date then in this case, the remaining amount of Rs 2,000 will be added into the next month's statement. If in April, you have made fresh purchasing worth Rs 3000 then your credit card bill statement for this period will show total due amount of Rs 5000 plus the interest.
Minimum due amount
This is the minimum amount which you must pay after getting your bill statement. every time. Usually, this amount is three to five per cent of the total due amount. A smaller part of this amount will goes towards repayment of the principal amount, while, the bigger part goes towards financing of interest.
It can be defined as the amount which you have not paid on the previous bill and it is carried forward to the bill of next month. Purchases made
It includes the purchasing which you have made on the credit card during one billing cycle.
Late payment fee
If you will not make payment of your bill by the due date then you will bear late payment penalty. br />
It is what the credit card company will charge you for using the credit card and for not making the timely payment of bill.
It is the tax which is levy by credit card company for offering their services.
Cash advance limit
Every credit card company permits a cash withdrawal facility on the credit card, which is usually a fixed percentage on the total credit limit.
It is the maximum amount for which you will be allowed to make purchasing on the credit card.
Types Of Credit Cards
Standard credit cards:
Such type of credit card allows the user to have a revolving balance up to a certain credit limit. Credit will be used up when you will make a purchasing. A finance charge would be applied to the outstanding balances at the end of each month. Credit cards come along with a minimum payment that must be paid by a certain due date in order to avoid late payment charges.
Premium credit cards:
These cards give incentives and benefits beyond the regular credit card. Some of the examples of premium credit cards are gold and platinum cards that give cash back, reward points, travel upgrades and varied other rewards to cardholders.
Charge cards do not come along with any credit limit. The balance on the charge card must be paid in full by the end of each month. Usually, charge cards do not come along with any finance charge or minimum payment as the balance is required to be paid in full. Late payments will be subject to a fee, charge restrictions or card cancellation, which will depend on the card agreement.
Secured credit cards:
Secured credit cards prove a useful option for those who are without any credit history or have blemished credit. The cardholder is required to pay a security deposit on the card, which in turn will decide the credit limit on the secured credit card.
Business credit cards
Business credit cards are specifically designed for business usage. It offers business owners an easy method of separating their business and personal transactions.