What is a credit card?
A credit card is a financial tool that provides you with a line of credit with a predefined limit for purchasing goods and services at stores, from catalogues, or online, or for obtaining cash advances. Credit cards enable you to obtain goods and service now, and pay for them later, at an agreed-upon interest rate. Credit cards are issued either by banks or by merchants. Credit cards may either be secured against a cash deposit or unsecured.
The plastic credit card with a magnetic strip many people carry in their wallets or purses is the end result of a complex banking process. Holders of a valid credit card have the authorization to purchase goods and services up to a predetermined amount, called a credit limit. The vendor receives essential credit card information from the cardholder, the bank issuing the card actually reimburses the vendor, and eventually the cardholder repays the bank through regular monthly payments. If the entire balance is not paid in full, the credit card issuer can legally charge interest fees on the unpaid portion. Individual banking institutions have their own policies when it comes to credit card applications. Customers may seek either a secured or unsecured credit card, depending on their individual repayment histories (credit rating). A secured credit card requires the applicant to deposit an amount of cash equivalent to the credit limit desired. A deposit of $1500 USD, for example, should be
If you haven’t had your own credit card account, here’s a brief overview to help you understand how it may fit into your money management plan. Using credit wisely is an important tool in establishing your financial independence. Credit cards are useful for emergencies, to build credit history, or for making travel arrangements, for example. However, you must beware that the convenience offered by credit cards may be seductive in a society of instant gratification where the line between needs and wants is very thin. Credit cards make it easy to have what we want right now, but the price can be very steep. A credit card is not a free cash substitute. A credit card establishes a revolving credit agreement between you and the issuer. You are given an account with a credit limit; once you pay back the amount you charge, that money is available to use again up to the credit limit. By contrast, a loan is installment credit. The lender disburses a loan amount that you are required to pay back
A credit card is a card that allows you to borrow money to pay for things. There will be a limit to how much you can spend called your credit limit. At the end of each month you can either pay off the whole of the amount you owe or make a minimum repayment. Other kinds of cards include: • A cheque guarantee card, issued by your bank, that you can use to ensure that your cheque will be honoured up to a certain limit. • A charge card where you have to repay the full amount at the end of each month. • A debit card, issued by your bank, where whatever you spend is immediately deducted from your bank account Do you need a credit card? Using a credit card is a useful way of making purchases: • A credit card means you dont need to carry huge amounts of cash around and risk losing it. • A credit card means you can buy items over the internet. • A credit card means you can make purchases abroad without having to worry about local currency. • A credit card gives the opportunity to spread the cos
