A modern credit card is not just a payment instrument. To increase the ability to get a quick loan at any time, banks have added premium service packages, exemption from interest payments, access to bonus programs and increased cashback. With a credit card, you not only spend, but also get:
- Collect points to buy free tickets;
- Get free insurance;
- Have a more favorable exchange rate.
Considering that RPA in the banking industry is increasingly used, soon any financial issue can be resolved with a plastic card.
What is the essence of the product?
A credit card is a plastic medium tied to a bank account in the name of the holder. The owner of the funds on the account is the bank. A holder is a borrower who has access to a revolving loan. The amount of funds available for spending on the card is called the credit limit. It is already credited to the card when it is issued to the client.
Unlike a simple loan, on which you pay interest every month strictly on schedule, credit card debt arises only when funds are spent. If you don’t use the card, you don’t owe the bank anything. Another difference is that you can spend any amount within the limit, and interest will be charged on it.
The credit limit is the maximum amount that the bank is allowed to spend from the account. It can be increased if you actively use the card and pay off the debt on time. You cannot spend more than the limit, but you can replenish the card in excess of the amount of the limit. These funds will be spent as a debit balance on a regular card. The credit limit is made up of the account balance and the amount owed. In order to use all possible balance in the new period, it is necessary to pay off the debt of the previous reporting period in full. Otherwise, only the unspent balance will be transferred to the new reporting period.
Grace period is an interest-free period for using a credit card. It can be from 30 to 100 days or more, during which you do not pay the bank for using the money. The grace period is associated with the reporting period and begins on its first day. This can be the day the card was issued, the first day of the month, or the date of the first purchase. Information about the debt of the grace period is available in the credit card information in the mobile application and in the personal account on the bank’s website. If you manage to return the money before the specified date, no interest will be charged.
The interest rate is the fee you pay to the bank for using the money. Interest is calculated from the next day after the end of the grace period on the amount of actual expenses on the card in the reporting period.
The reporting period is a certain period, as a rule, one month, all expenses of which are considered for the calculation of interest on the formed debt.
The minimum payment is the amount of the monthly payment to the bank when paying off the debt on the card.
Commission is a fee for individual transactions. Each bank has its own conditions for withdrawing cash from cards, SMS informing, insurance, wire transfers, the cost of annual account maintenance, etc. In order not to overpay, choose cards with free service and additional bank privileges.
The internal processes of modern banks are fully automated. This eliminates the possibility of human error.
Read More: Tips to Handle a credit card Responsibly.
Depending on the banking package you receive with your credit card:
- Cashback – the bank returns part of the money spent from the account in rubles to the account or in bonuses;
- Bonuses are points accrued from each purchase made with the card. which can be exchanged for goods, discounts, money;
- Privileges – free access to business lounges, life insurance, dedicated support line;
- Discounts – a reduction in the cost of goods and services when paying with a card at the bank’s partners.
In addition, a credit card forms a credit history. If you have a large limit, and you do not violate the terms of the contract, when applying for a mortgage or targeted loan, this will confirm your reliability.