Today, banking organizations offer their customers cards, which can be divided into two basic types: debit and credit cards. Their difference lies in who owns the assets on the card. With a debit card the assets belong to its owner, and in the case of a credit card the assets belong to the issuing bank.
Credit cards are becoming more and more popular among people with absolutely different income levels. It makes sense to consider their advantages, disadvantages and other important details that are a must-know for the credit card holder.
A credit card is a loan, therefore, the cardholder acts as a borrower. It is his responsibility to repay the money spent to the bank with the added interest charges. Each credit card has its own program of the bank, which determines all aspects of the use and repayment of the money. Typically, the interest rate on a credit card varies around 20%.
It may seem that a credit card is one of the most disadvantageous types of loan for the customer. But that’s not entirely true. In order to attract new clients, banks are increasingly introducing a new service, the so-called grace period.
This period is a period of time during which the cardholder can repay the money to the bank without additional interest. In words it sounds fine, but at the conclusion of the contract the client should be particularly careful. After all, the “benefit” consists of two parts: the settlement and payment periods. Each bank differently distinguishes between these elements of the interest-free payment period. So you will need to study all the contract terms scrupulously when you get the credit card. Also, an important detail is that the benefit works only when you perform noncash payment operations. The interest on the cashed-out money is charged from the moment of its withdrawal at an ATM. Very often the bank organizations also charge a fee for withdrawing cash from credit cards.
As with an ordinary loan, delinquency in repaying a loan will inevitably lead to penalties from the lending bank. Do not underestimate the importance of timely repayment of debts on plastic. In fact the credit card is a form of loan and consequently all operations with it are reflected in the credit history of the borrower. There’s no point in saying how important it is to keep it in order and what consequences a negative credit history can lead to.
In conclusion, we can make the point that the credit card is a convenient and profitable tool to make payments for its holder. But such a favorable characteristic will remain only if the borrower repays all his credit debts in time, as well as does not cash out from the card.