9 Things you should know about Credit Card

Credit Card

In the present time, most of you prefer to carry out our day to day transactions using a credit card. So, you need not have to keep any liquid cash in your wallet. The credit card has made your transactions more secure and convenient. Starting from buying movie tickets to any online shopping, a credit card makes your payment experience quite easy and feasible. But if you overuse it, then you are spending without any limit which is not so good. So, be very wise while using the credit card and enjoy its benefits.

To make your credit card experience much more effective, the following are important things that you must know about the credit card.

  • Your Credit Score- Your repayment capacity reflects in your credit score. If you have taken any loan previously and paid it off within the time period, then your credit score becomes high which is really excellent. But if you were a defaulter, then it will reduce your credit score and your creditworthiness will be questionable. The credit score is evaluated within 300-900 points. Credit providers usually approve credit card if your credit score is above 750. So, just remember that you need to pay off your existing credit or liability within the stipulated time to have a high credit score. This will help you to opt for a credit card and use it as per your need.
  • Credit card bill payments within the interest-free period- After using the credit card for your transaction, you need to pay the equivalent amount. If you pay that amount within the interest-free period, then you need not have to pay any extra charges to the credit card provider. The interest-free period is the time gap between the transaction date and the due date of the payment. But if you pay the amount after the due date, you need to pay the interest rate which is really high. So, to avoid paying any extra charges, be sure to pay the credit card bill within the interest-free period.
  • Minimum payment of your credit card– You can either pay the full credit card bill or can pay the minimum payment of your credit card transaction. Depending on specified % of your outstanding balance or total interest amount taking into account 1% of the principal, your minimum payment amount is evaluated. This minimum payment amount differs for different credit card providers. But you can also pay more than the minimum amount. 
  • Credit card is not free money– You need to remember that the credit card is not free money that you are spending. It is nothing but a kind of loan which you borrow for your transactions and pay it back. So, you need to repay that amount that you spend using the credit card.
  • Unsecured and Secured credit card– When you apply for an unsecured credit card, the interest rate that is charged is quite high. But for a secured credit card, you need to keep collateral which can be a fixed deposit. So, the interest rate charged is quite low and you can use the card within the limit of the collateral.
  • Rate of Interest– The interest rate that is charged on credit card are usually high if you compare it with different types of loan. Depending on the Annual Percentage Rate (APR), credit card follows the mechanism of daily compounding rate of interest. However, there are many factors that influence the APR which can affect your credit card interest rate evaluation.
  • Credit limit on your card– Every credit card provider set a maximum amount beyond which you cannot borrow. You need to spend within the credit limit. But if you reach close to the credit limit or exhausted the limit, then it is really a bad sign as it will decrease your credit score. So, always spend within the credit limit.   
  • Cashback & Reward points– Credit card offers many discounts, cash-backs, and reward points to improve your experience. You can use the reward points all together to carry out any transaction. Also, many credit card providers tie-up with fuel stations, airlines to offer various attractive deals. So, when you are using the credit card for transactions, it not only offers you an easy payment method but also offers cash back, reward points and other attractive deals. 
  • Charges on credit card– When you are using a credit card, you need to keep in mind the fees and charges that the credit card provider levies on account of late payment, withdrawing money from an ATM and so on. The type of fees that are charged on credit cards is- late payment fee, balance transfer fee, annual fee, over the limit fee and cash advance fee. 
  • Choosing the right credit card– When you decide to go for a credit card, you need to choose the best card that suits your requirement and repaying ability perfectly. Your monthly income, spending habit, existing credit (if any) play a major role in your selection of credit card. Also, remember your credit score gets influenced by your credit card, So, be very wise while choosing the credit card. To efficiently manage your expenses using the credit card, you can opt for that card which offers good discounts, reward points, cash back and extra miles on your transactions. 

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