What Is A Credit Card?
It is a payment card issued to a user who is referred to as the cardholder, to enable him/her to pay for goods and services from a merchant. The payment depends on the agreement reached between the card issuer who is paying for the good and services with additional charges. Usually, the card issuer is a bank who grants a line of credit to the cardholder through a revolving account created, which stands as a source of funds for the cardholder to pay the merchant for goods and services and borrow in advance. It is the combination of service payment and credit extension. One of the most divisive tools in the financial industry is a credit card.
Debit card and credit card are both cards used to pay a merchant for goods and services, but understanding the difference between them allows a user make good financial decisions. The key difference between a debit and Its is where the either of the cards pulls money. A debit card calls money directly from a bank account while a credit card charges to the line of credit granted by the issuing bank. It can be quite difficult to decide when to use either of both cards. Some say that credit card allows some additional services and makes it easier to request or return a refund. The interest paid on a debit card should help you decide the credit card to get. A credit balance paid in full at the end of the month does not attract interest. The bank issuing the card decides the interest rate, so it is important to find out the bank that best suit your needs. A good credit score qualifies you for better credit cards.
Benefits Of Using Credit Card
Reward Points: Reward points are earned per dollar spent on a transaction or with a card. This is given by the issuing credit card company and the points vary based on purchases.
Safety: Using a credit card is safer and faster than carrying physical cash, the chances of getting robbed, or losing your purse are high and it is unlikely for it to be recovered. But a lost credit card can be canceled if a similar scenario happens. Security procedures are put in place by the credit card issuing companies or banks to protect cardholders like a stolen card or suspected fraudulent transaction on the account.
Universal currency: Credit cards are allowed to make payment of goods and services in any currency, although conversion rates apply. Some credit cards waive charges on international transactions.
Emergency: In case of emergency, a credit card sometimes is a financial safety if there is not enough money to cover the unexpected cost that arises e.g. purchase protection, insurance or roadside assistance.
Savings: It might sound unreasonable to assume that you could save money on credit cards.
There are merits to it: A good credit profile equals cheaper cheap lending rates, savings could climb up to thousand when paying off mortgages.
Credit History: Your credit profile is affected positively when it is used wisely. To attain a good credit profile, the credit card has to be used frequently and quick payment of balance. That creates trust between a user and an issuing bank.