What is a credit card?A credit card is a small plastic card that allow you borrow money from a financial provider. interest is a fee, you’ll pay for the privilege of borrowing money for a significant period of time.
credit cards are secure and convenient way to pay and build your credit score(a three-digit number that represents how reliably you’re expected to pay your debt) There will also be a maximum you can borrow at a time that is limit of your credit. You have to pay back whatever you borrow in a significant period.
How do credit cards work?For using a credit card responsibly, you have to understand how it works. Here is some useful terms related credit card that helps you to understand the basics of credit card.
Using a credit card means that you’ll repay your bank later for your purchases. But when do you have to pay? Fixed period of time in which your bank will collect all the transactions made by you and send you bill for your purchase is called billing cycle. It isn’t necessary for a billing cycle to line up with each month. It can start from the 1st to the 30th, but it could also start from the 25th of one month to the 25th of the next month, and so on. You can find out your billing cycle by contacting your credit card provider’s customer care services or by date of statement generation of each month.
How does interest work?
People afraid off credit cards because they’re worried about interest. interest rates of Credit card , also known as finance charges, depending on types of credit card and bank. Before getting a new credit card, you must understand the interest rate charged on it. Every credit card has a fixed finance charge and it will be the same for all the customers.
However, you don’t charged any interest if you pay your bill in full within a certain amount of time called grace period to pay off your purchases. If you pay your entire balance within this period, your purchase will be interest free
If you pay less than your full balance(minimum due amount) by the due date, helps you to avoid paying late payment fee, which is usually a flat fee between ₹100 and ₹1,000, depending on the amount and your bank, but interest on the outstanding bill amount will not be waived off.
credit card statement :
It is a summary of how you have used your credit card for previous billing cycle. To be a responsible credit card user you have to understand the credit card statement. Read your credit card statement carefully helps you to spot any unauthorised charges or billing errors to minimise your liabilities for those charged. it’s a good idea to pay your entire balance to avoid unnecessary interest. But you can also choose to pay the minimum amount possible or some amount in between. The amount you pay will decide how much interest you owe.
You can pay off your balance immediately before generation of your bill as you wish.
How long is a billing cycle?
A billing cycle is usually between 25 and 31 days, but depending on the type of card or card provider, it can be longer or shorter.
A grace period is the period between the end of a billing cycle (statement generation date) and the date your payment is due.
If your card gives a grace period and you are not carrying a balance, then you can avoid paying interest on new purchases if you pay your balance in full by the due date. If you fail to pay your balance fully by the due date, you will be charged interest on the unpaid portion of the balance. You will also be charged interest on purchases in the new billing cycle starting on the date each purchase is made. Grace periods typically apply only to purchase transactions. If you get a cash advance or use a check you received from your bank, generally interest charged from the date of the transaction.