What is Credit Card and Types of Credit Cards

If you want to learn more about Credit card before getting one for yourself, then read the article below as it helps you understand more in depth information about Credit cards…

What is Credit Card

A credit card is a plastic card issued by a financial institution that allows the cardholder to borrow funds from the issuer up to a certain limit to purchase goods or services.

The cardholder is then required to repay the borrowed amount, along with interest and fees, at a later date. Credit cards usually come with rewards or incentives for the cardholder, such as cashback, points, or miles.

How does a Credit Card Work

A credit card is a type of payment card that allows you to borrow money from the bank to make purchases. The credit card size is same for all cards like debit card and other. Here the below info will shows you about, how a credit card works

Credit Card

Application

You apply for a credit card by filling out an application form and providing personal information such as your name, address, and income. The bank will then review your application and determine if you qualify for a credit card.

Approval

If your application is approved, you will receive a credit card with a credit limit. This limit is the maximum amount of money that you can borrow from the bank.

Use

When purchasing with your credit card, the amount of the purchase is charged to your account. This means that you are borrowing money from the bank to pay for the purchase.

Repayment

At the end of the billing cycle, you will receive a statement that shows the total amount you owe. You can either pay the entire balance in full or make a minimum payment. If you only make the minimum payment, interest charges will accrue and the balance will continue to grow.

Interest

If you carry a balance on your credit card, you will be charged interest on the outstanding amount. This interest is usually a percentage of the balance and is added each month.

Types of Credit Cards for Customers and Business

Credit cards are not just limited to individual customers but can also be used by businesses. So, there are different types of credit cards for both individual customers and businesses that we will learn more about below.

  • Basic/Standard Credit Cards: These are the most common types of credit cards, providing basic features and benefits such as cashback rewards, purchase protection, and fraud protection.
  • Rewards Credit Cards: These cards offer various types of rewards such as cashback, miles, or points for each purchase made using the card.
  • Travel Credit Cards: Designed specifically for travelers, these cards offer benefits such as airport lounge access, travel insurance, and miles or points for travel-related expenses.
  • Low-Interest Credit Cards: Ideal for those with a large balance on their card, these cards offer low-interest rates, making it easier to repay the balance over time.
  • Balance Transfer Credit Cards: These cards offer low or 0% interest rates for a specific period, allowing you to transfer high-interest debt to a new card.
  • Secured Credit Cards: These cards are designed for individuals with limited or no credit history. They require a security deposit and offer a low credit limit.
  • Business Credit Cards: These cards are designed for business owners and offer features such as rewards, employee cards, and expense tracking.
  • Student Credit Cards: These cards are designed for students and offer low-interest rates, cashback rewards, and other benefits to help build credit history.
  • Premium Credit Cards: These cards offer luxury benefits such as concierge services, VIP lounge access, and high-end rewards.
  • Affinity Credit Cards: These cards are issued in partnership with a specific organization and offer rewards and benefits for members.

Things to know about When using Credit Card for Payments

Two important things that you will need to know about while using Credit cards for payments are listed below.

What is a Credit Card Statement

  • A credit card statement is a periodic or monthly report that lists the purchases and balances of a credit card account.
  • Each transaction’s date, merchant, amount, and status are normally listed, as well as the current balance, interest rate, credit limit, required minimum payment, and due date.
  • Credit card statements also show any fees, late payment penalties, rewards, and other account related information.
  • They are often mailed to cardholders or accessible online.

What is a Credit Card Security Code

  • The three- or four-digit number printed on the back of a credit card is the credit card security code, commonly referred to as a CVV or CV2 code.
  • It is applied to prevent fraud and confirm the legitimacy of credit card transactions.
  • The presence of the security code is required for a transaction to be accepted because it is not stored on the card’s magnetic strip.
  • It is distinct from the card’s identification number (PIN), which is used for ATM withdrawals and other kinds of electronic cash transfers.

What is the credit limit on a credit card?

The credit limit is the maximum quantity you can borrow using your credit card. This limit is set by the bank based on your acclaim history and financial situation. Your credit limit will impact how much you can spend using your credit card.

What is an APR?

APR stands for Annual Percentage Rate. It is the interest rate you pay on the amount you borrow using your credit card. The APR includes the interest rate and other fees associated with using the credit card.

Can I use my credit card abroad?

Yes, you can use your credit card abroad, but there may be additional fees, such as foreign transaction fees, charged by the bank for using the card outside the country.

How can I report a lost or stolen credit card?

If your credit card is lost or stolen, then you should immediately report it to your bank. You can report it online, by phone or individually at a branch. The bank will then cancel your old card and issue a new one.

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