Credit card : One card, many Possibilities

 

A credit card is a card which allows people to buy items without cash. Each card has a unique number and  benefits. Using that particular  number and the other details on the card (such as the validity date, or a code), the customer can buy any goods or services. The issuer of the card, then transfers the money to the seller. The person using the card gets a credit. The customer has a certain amount of time to pay the credit card bill. If the bill is left unpaid for some time, the customer will have to pay interest for the amount that is left unpaid. Payment using a credit card is one of the most common methods of electronic payment in today’s world.

Types of Credit Cards in India:

Basic Credit Cards : This credit card will be the preferred choice for those who wish to try out using a credit card. You will be given a Credit card and the limit will be based on your income and you can make purchases within the given limit. There are no additional benefits given on such card.

No Annual Fee Credit Cards: A no annual fee credit card does not levy an annual fee for the usage of the credit card from its customers. It can be considered as a basic credit or slightly above that level that provides very few benefits to its customers. 

Rewards Credit Cards: A rewards credit card is the card that offers some kind of rewards for every rupee you spend with the card. Every bank defines the number of reward points you get for a specified type of transaction, such as grocery, shopping and online bill payment.

Cashback Credit Cards: Cashback credit cards offers a certain percentage of the purchase amount as cashback whenever you make a transaction with the card. The bank may also mention criteria such as cashback is applicable only for grocery transactions.

Travel Credit Cards: Frequently the  travelers benefit from a Travel credit card as the card offers benefits such as travel insurance, global acceptance, favorable currency conversion rates, and many more benefits.

Shopping Credit Cards: The Credit cards that come with deals and offers when the card is used to pay for the shopping expenses. Online and offline shopping can get you additional rewards for every purchase.

Entertainment Credit Cards: Kind of Credit cards that provide discounts and offers on the entertainment are known as Entertainment credit cards. Such spends on cards  include movie ticket purchase, concert ticket purchase, amusement park ticket purchase  and the other events.

Premium Credit Cards: Premium credit cards are dedicated for the selected customers. It provides free access to golf clubs, airport lounges, concierge service, and insurance. It may also come with complimentary travel and hotel accommodation coupons.

Advantage & Disadvantage of Credit Card :

A credit card has become an inevitable part of our lives, with its ease of use and convenient pay-back options. The discounts, offers, and deals that a credit card offers are unmatched by any other financial products. However, credit cards can become a Debt traps if not used correctly, or if you spend more than you can repay when the bill comes around.

Benefits of Credit Cards :

Easy access to credit : The biggest advantage of a credit card is its easy access to credit. Credit cards function on a deferred payment basis, which means you get to use your card now and pay for your purchases later. 

EMI facility : If you plan on making a large purchase and don’t want to sink your savings into it, you can choose to put it on your credit card as a way to defer payment. In addition to this, you can also choose to pay off your purchase in equated monthly installments as EMI, ensuring that you aren’t paying a lump sum for it.

Incentives and offers : Most credit cards come packed with offers and incentives to use your card. These range from cash back to rewards point accumulation each time you swipe your card, which can later be redeemed as air miles or used towards paying your outstanding card dues. Lenders also offer discounts on purchases made through a credit card, such as on flight tickets, holidays or large purchases, helping you save.

Disadvantages of Credit Cards :

Hidden costs : Credit cards appear to be simple and straightforward at the outset, but have a number of hidden charges that could rack up the expenses overall. Credit cards have a number of taxes and fees, such as late payment fees, joining fees, renewal fees and processing fees. Missing a card payment could result in a penalty and repeated late payments could even result in the reduction of your credit limit, which would have a negative impact on your credit score and future credit prospects.

High interest rate : If you do not clear your dues by your billing due date, the amount is carried forward and interest is charged on it. This interest is accrued over a period of time on purchases that are made after the interest-free period. The Credit card interest rates are quite high, with the average rate being 3% per month, which would amount to 36% per annually.