Having credit cards seems to make things a little easier in life. With a significant part of the approved limit remaining on your cards, you feel comfortable buying things you want at any time.
You may already have a sense of how credit cards work and how to deal safely with a credit card, but the devil is in the details.
Nonetheless, they are a double-edged sword; use them irresponsibly, and you could end up drowning in debt that carries an insane rate of interest.
Once you dive in, learning the ins and outs of credit cards will save you money and help you get loans faster. Though before that, you need to know it all about the basics of credit cards. Let’s dig deeper:
Applying for Credit Cards
While you may find indirect third party agencies more tempting, applying for credit cards directly through a reputable bank is the first step.
As a beginner to credit, you may not qualify for the most popular credit cards – those with rich rewards and benefits, significant sign-up incentives or lengthy interest rates of 0 percent.
These cream-of-the-crop items are only applicable to applicants with good or excellent credit score and a more extended credit history that fulfills other income requirements. But you can increase your credit score with sensible use of credit cards and upgrade them in the future.
Different Interest Rates
Interest is the amount of money a borrower owes to a lender in return for the lender’s money being used for a particular duration.
The same is true for credit cards as well, although in a slightly different way. Not paying the credit cards bill on time or withdrawing cash using your credit cards makes you liable to pay the interest to the lender.
Thus, it is crucial for you to know about these interest rates before you start using your credit cards for various needs in life.
Credit cards are called revolving credit because your credit is eligible for you to use again as you pay the money back.
For instance, you have an approved limit of Rs. 50,000 on one of your credit cards and your monthly bill is Rs. 20,000.
It means you only have the remaining Rs. 30,000 limit is available to you.
However, if you pay the bill, the limit gets re-added to your remaining limit, making the total limit of Rs. 50,000 accessible for use again.
Annual Fee and Finance Charge
Many financial institutions offer credit cards at a yearly fee. This fee is the amount that a credit card issuer pays for using the card in a year.
The term ‘finance charges’ mean the amount of money that a borrower owes to a lender for the benefit of borrowing money, including interest and other costs for operation.
While you may find some credit card offers with zero annual fees, it is crucial for you to know about these fees, which might come up as hidden charges later in time.
Secured vs Unsecured Credit Cards
A secured credit card is a savings b backed by a credit card. The money in the savings account is a guarantee, which means that the company that issues the card may demand it if the account holder fails to make the required payments on time.
However, you can even get credit cards from various banks without the need to have a savings account as well. These are called unsecured credit cards. Since both these types of cards function similarly, it is up to you to decide which kind of credit cards you want.
Many credit cards come with incentives like extended warranties, sales coverage, and guaranteed returns.
You can apply for credit cards from reputable financial institutions such as Axis Bank, that offer you a plethora of benefits to promote cashless payments for all your needs. Switch to credit cards right away for a seamless and beneficial way of paying for your bills and other utilities.