Introduction: Hello friends, today we are here with a great information of credit card types, advantages, and disadvantages. What is credit card? A credit card is one of the types of bank card which will allow you to lend funds which is also called as credit prior to the repayment with interest. They will work as a loan type, but rather than receiving funds in an account you receive credit that you are spending through the card, before you pay back what you owe every month.
A step by step guide to credit card types
There are several different types of credit cards which have been introduced for different people and on several different purposes which include cards which
- Will offer rewards based on how you are using then.
- Will help you to build a credit report.
- Will allow you to transfer the current balance onto a new credit card with a low-interest rate or no interest rate.
The credit card type you will require will be completely based on your own scenarios. What are we waiting for? let us jump in credit card types and it’s pros and cons.
Working of credit cards
If you have successfully applied for a credit card, you will be receiving it in the post. You will also receive a Personal Identification Number separately to use the card. Once you get both of your credit card and PIN, you will be required to activate the card, mostly online, for it to be prepared for use.
You can consider making the credit card usage for purcha
ses before you pay back the outstanding balance amount or part of what you have to pay each month. There is generally a minimum payment on a monthly basis you should make to get rid of any fees, but if you are paying your balance back completely every month, you will be able to avoid paying interest.
You should not miss the Credit Card Balance Transfer Tips.
This means that if you are using the credit card in a sensible manner, then they will function just like a loan which comes with no interest. Anyways, if you are not making your payments on time, you will have to face the charges which come with high rates of interest. By making use of your credit card in a responsible manner, you will be able to get a good amount of financial benefits.
Am I eligible to use a credit card?
If you have a doubt about receiving a credit card, you should take into consideration if you are in the best place to apply. When it can differ between the banks, they will usually use the below criteria for taking a decision about the acceptance of your application.
Your Financial background
Any cases or bankruptcies in your financial background will make the probability of your credit card application less.
- Earnings: Some banks need you to be earning on a regular basis for getting qualified – few even have a minimum amount you are earning.
- Credit score: Lenders will check your credit history and then report and use this particular information for giving you a credit score. As each lender will generate their credit score dependent on their own needs you could have different scores with several companies. Credit card providers will make use of this score for the determination if you get qualified for their credit card.
When you are applying for a credit card, it will leave a record on your credit report, and the more applications you are making – specifically rejected applications – the harder it could be to receive credit in the future.
This is because so many credit card applications could make lenders have a thought that you are struggling with your financial situations or are an irresponsible borrower. In the end, they may also think that you will not be able to make any repayments in future.
Advantages of credit card
As long as you are using the credit cards properly, credit cards can have many advantages over a debit card and payments of cash. This will include
Splitting purchases cost
By making use of your credit card, you will have an opportunity to divide the cost of a large purchase like a home appliance, over several payments on a monthly basis. This will be useful for emergency scenarios where there is a chance that you are struggling to make payment immediately for something you require.
Purchase and pay later
This would be a comfortable option of using a credit card, as it will allow you to purchase a product or service but not pay for it until the day of payment rolls around and you can make repayment on a monthly basis.
Any purchases you are making by using a credit card can be protected. This means that if any transaction goes wrong, for instance, if any fraudulent transactions take place, you can claim the funds back by getting in touch with your bank. You can also get a refund if you are not negligent about it.
You may also like the Axis Youth Debit Card Benefits.
Receiving a loan which is free of interest
Few credit cards will provide a 0% interest period which will allow you to effectively borrow funds for free, giving you an opportunity to make payments on a monthly basis. Even if you are making payment with the minimum amount needed per month, you will have to be borrowing interest-free until this time period comes to an end. At this particular point, it would also be best to pay off your debt, else there is a chance that you will be placed on the bank’s standard rate which would be somewhat high. You will also be placed back on the standard interest rate if you are missing a payment or exceed your credit limit. While the credit cards which are interest-free will be a big benefit, they should be used in a sensible manner.
Receiving rewards and benefits
Many credit cards will come with several benefits and incentives which can be useful if you are picking the correct ones. For instance, if you love shopping, there are chances of getting a cashback or store credit card to be the best when if you are frequently flying from one country to another you might prefer an airline card.
Reducing your debt
By making use of the feature of balance transfer on your credit card, you will have an option to transfer current debts on to one credit account generally with less or no interest. This means you decrease the amount of money you are paying on your interest, allowing you to make a payment off the debt faster.
Increasing your credit rating
If you are having a poor or limited credit report, credit builder credit cards can give away for improving your financial situation and then create good habits of borrowing. As they are aimed at the people with a credit rating which is poor, they can frequently charge higher interest rates, but as long as you are making repayments in full, you will not be required to pay any kind of interest. In a consistent manner, if you pay your balance, you will be able to build your credit report slowly as you show that you are able to borrow money in a responsible manner over a long time period.
Disadvantages of credit card
When you are using a credit card, you should be aware of the below risks.
Possibility of debt
The main risk of having a credit card is that it may land you in rising debut if you are unable to make payments back. There is a chance that few credit cards will charge high-interest rates. Sometimes more than 20% and this may increase quickly if you do not make the pay the balance off.
If you allow your credit card debt increase or missing payments, can have a great influence on your credit rating. The lesser your credit rating, the harder it will be to apply for a credit card in the future.
Fees and charges
Credit cards will also come with few fees and charges if you are not meeting your repayments or you cross your credit limit. You will be required to be careful with how are you using them.
You will have a few restrictions on how and where to use your credit card. For instance, many credit cards which charge you for cash withdrawals or by making use of the credit card abroad unless stated in the agreement of credit. That’s all folks about credit card types, hope you have enjoyed the content. You can use thse credit cards for travel purpose as well to avail travel offers and benefits.