Many individuals struggle to distinguish between debit cards, often referred to as ATM cards and credit cards. The details of how credit cards function and potential drawbacks remain elusive to them. whether a credit card is necessary often arises.
One crucial aspect often overlooked is that banks generate revenue through credit cards. Surely, you've met the terms "debit card" or "ATM card" before, right?
Typically, banks provide customers with a debit card upon
account opening. The hassle of visiting bank for cash withdrawal is eliminated.
Conveniently ATMs in proximity to your residence or workplace facilitate both
cash recovery and online fund transfers.
Credit cards seemingly offer a comparable utility. The funds
at your disposal with a credit card are not inherently yours.
Towards the close of the month, if your account lacks
sufficient funds and you face a vital purchase credit card can prove
invaluable. Utilizing, you can complete the transaction and subsequently settle
the dues with the bank through a billing statement.
A credit card comes with a predefined monthly spending limit
and upon the conclusion of a monthly cycle, you are obligated to settle the
incurred expenses by making a payment towards the bill.
However crucial to recognize that acquiring a credit card
isn't as straightforward. Various documents need submission to the bank for
evaluation of your financial standing, which then influences the issuance of
the credit card. These cards are categorized into tiers such as silver, gold,
platinum, diamond, and more. Each level involves distinct credit limits,
advantages, and distinct terms and conditions.
These advantages can also be referred to in simpler terms as
benefits. These perks encompass receiving cashback, enjoying exclusive
discounts at varied brands, eateries, airports, and shopping malls.
The extent of your credit limit defines the maximum monthly
allowance extended by the bank constraining your expenditures within this
limit. This determination involves an evaluation of your credit score and
income, gauging your earnings and financial interactions with the bank. Prompt
transaction handling could even prompt the bank to consider increasing your
credit limit.
Upon acquiring a credit card, you're assigned a prearranged
sum, repayable either online or via the card. Particularly, adept utilization
of a credit card empowers you to adeptly navigate your credit cycle.
My bill was generated on July 15th, with in deadline for settlement
set on August 5th. I must render full payment by August 5th for all expenses
charged to my credit card in the preceding month. Moving forward I intend to
exercise my credit card exclusively after the billing statement issuance. The
merit of this strategy lies in the subsequent bill being generated by August
15th, needing payment by September 5th. This approach affords a timeframe of
approximately 45 to 50 days.
In case of a delayed bill payment around are consequential
outcomes. Initially you'll suffer a late payment fee, and an interest rate will
be put on the accumulated expenses. The bank does present the option of minimum
payment enabling you to settle a fraction of the total to sidestep the late
payment fee. However, this tactic doesn't effectively shield you from incurring
interest charges.
If the habit of late payments becomes a repeated pattern
while you continue using your credit card then you gradually amass a growing
debt burden over time.
The most efficacious approach to circumvent these challenges
is by ensuring punctual bill settlements. Additionally, it's advisable to
maintain a credit limit lower than your monthly income, enabling you to neatly
navigate surprising obstacles might arise.
Now among these aspects, primary advantage of utilizing a
credit card lies in the fact that you're tapping into the bank funds rather
than your own. In addition to this, you can capitalize on cashback incentives,
exclusive discounts, and a variety of offers tied to your credit card.
If you diligently settle your bills on time and avoid
accruing interest, how does the bank generate revenue?
If your credit history stands strong, you're frequently presented
with novel opportunities. While you may initially accept these offers, there
might be instances where you later struggle to settle the full amount. In such
cases, the bank extends an option to transform your dues into manageable
installments. Upon choosing this route, bank imposes a processing fee, and
interest is applied even on extended-duration installments.
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