In this digital world, you need more cards in your pocket instead of money. Surprised, but it's true. It's true because of the plenty of offers, rewards, and cashback available on cards.
This attracts us towards cards, and further, it is easy to use cards, and we find availability of swipe machines from malls to small shops.
What are Credit Cards?
In the series of cards, there is one named "credit card. " Let's understand with an example that what a credit card actually means. So let's say you need urgent money to purchase medicines from a chemist shop.
But you don't have enough cash, and further you don't have enough money in your bank account. Now, you can purchase them and pay for them later on.
Yes, as of now, the bank pays on your behalf via credit card, and you need to pay your credit card bill at the end of the month or as per your plan.
So basically credit card is a kind of mini loan which allows us to buy something now and pay for it later. Generally, there is no need to pay interest on the amount you used via credit card if you pay your credit card bill within 45 days.
Normally, you get a cash amount in loan, but the bank is giving you a plastic card here.
Bank puts a limit on credit cards beyond that amount you can't spend. This credit limit varies from bank to bank and also on your regular income.
Benefits of Credit Cards:-
1 . Immediate Expenses
If you have any urgency to buy something but don't have enough money, you can buy it with a credit card and pay for it after a certain period.
2 . Less Risky in comparison to Debit card
If any fraud happens with you, then in the case of a debit card, the money will be directly deducted from your bank account.
But in the case of a credit card, your bank will work on your behalf, and there is more security in case of fraud.
3 . Rewards
There are various rewards available when you make payments through credit cards. It includes discounts, cashback, insurance, etc.
Disadvantages of Credit cards:-
1. High-Interest Payment
Although the money used by credit card is free of interest within 30 to 45 days, if you don't make payment within a specified time, you have to pay very high interest.
2 . Unnecessary Shoppings
Sometimes you think that you have a credit card, and you buy unaffordable and unnecessary things. It pushes you into a debt trap.
Because at the end of the specific period, you cannot pay your bill and you may face a lot of problems.
How banks make money with credit cards:-
Banks earn a lot of money by issuing credit cards in the following ways:-
1 . Annual Fees
There are some credit cards on which you have to make annual payments to the bank to use them.
2 . Late Payment Charges
If you cannot pay back your credit amount on time, then the bank will charge a high amount of late fees from you.
3 . Cash Withdrawal
If you want to withdraw cash with a credit card, you need to pay 2 to 5 percent extra fees to banks.
So from the above discussion, it is clear that there is no doubt regarding the benefits credit cards provide to us during the time of urgency.
It acts as a savior for us in bad times. But it is only beneficial when you use it in urgent situations and for necessary purchases.
When you use a credit card to buy unnecessary or unaffordable products, and as a result, you aren't able to pay back your credit card bill, then it may lead you to bankruptcy.
So use your credit card responsibly and pay your pending bills on time; it will continue to help you urgently by providing a secure an interest-free loan.
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