At its base, credit card ownership means having a limited personal loan. Keeping it in your pocket will enable you to buy anywhere and anytime without necessarily having the cash required to pay. Your bill will come due after 30 or 45 days and at times even less than that.
When you get the bill, it means the credit company needs back the cash it loaned you. If you choose to clear the loan in full, you will have no problem.
Though if you partially pay your loan, the credit company will slap you with some pre-determined interest rates. The rates range between 13 and 30%, based on your credit score.
How a Credit Card Works
Once you open your credit card, you will get a credit limit, ranging from a hundred to a thousand dollars. You can only spend up to your limit.
When making a purchase using a credit card, it shows as pending on your account and post after several days. The total balance will increase after the transaction you made gets posted to your account.
Forms of Credit Cards
Main credit cards, including Discover, Visa, American Express, and MasterCard, are issued by credit unions, banks, and other financial institutions. Most credit cards lure customers by providing incentives to hotel room rentals, cashback on some purchases, gift certificates, and airline miles.
Today, there are many forms of credit cards available for use. Some of the major types of credit cards include regular and balance transfers.
Regular is the simplest form of the credit card. It doesn’t provide rewards and perks. They are convenient for parents intending to provide their kids with the convenience of using credit cards. However, the best thing about this type is that it has a pre-determined credit limit, allowing users to control their spending.
On the other hand, balance is an option provided to those with a balance on their existing credit cards. The debt gets paid off with a new credit card, and the holder clears the debt of the new card at a lower interest rate. Apart from balance and regular, you can also consider other forms of credit cards, such as:
Benefits of Owning a Credit Card
Using your credit card responsibly will be a priceless tool to travel, handle emergencies, build your credit score, and earn some rewards. Some rewards also come in different forms, like a discount on a gas station purchase and cashback.
When it comes to credit card services for small business, earning rewards is the primary benefit entrepreneurs can enjoy as they are allowed to redeem for the things they want to buy. Plus, some credit card companies provide fraud notifications to act as a safety net when you experience theft of information or a card.
Credit cards enable users to access a credit limit, which your card issuer provides. A credit limit is basically the maximum amount of cash you’re allowed to borrow.
Rather than offering you a full loan in cash, a card issuer will allow you to take as much as you want at a given time, as long as it’s within your credit limit.