CREDIT CARD
A credit card is a payment card issued to cardholders to enable the cardholder to pay a merchant for goods and services based on the cardholder's promise to the card issuer to pay them for the amounts so paid plus the other agreed charges. The card issuer (usually a bank) creates a revolving account and grants a line of credit to the cardholder, from which the cardholder can borrow money for payment to a merchant or as a cash advance. In other words, credit cards combine payment services with extensions of credit. Complex fee structures in the credit card industry may limit customers ability to comparison shop, help ensure that the industry is not price-competitive and help maximize industry profits. Because of this, legislatures have regulated credit card fees.
A credit card is different from a charge card, where it requires the balance to be repaid in full each month. In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest being charged. A credit card also differs from a cash card, which can be used like currency by the owner of the card. A credit card differs from a charge card also in that a credit card typically involves a third-party entity that pays the seller and is reimbursed by the buyer, whereas a charge card simply defers payment by the buyer until a later date.
History
The concept of using a card for purchases was described in 1887 by Edward Bellamy in his utopian novel Looking Backward. Bellamy used the term credit card eleven times in this novel, although this referred to a card for spending a citizen's dividend from the government, rather than borrowing.
Specification
The size of most credit cards is 85.60 mm × 53.98 mm (3.375 in × 2.125 in) and rounded corners with a radius of 2.88–3.48 mm, conforming to the ISO/IEC 7810 ID-1 standard, the same size as ATM cards and other payment cards, such as debit cards.
Credit cards have a printed or embossed bank card number complying with the ISO/IEC 7812 numbering standard. The card number's prefix, called the Bank Identification Number, is the sequence of digits at the beginning of the number that determine the bank to which a credit card number belongs. This is the first six digits for MasterCard and Visa cards. The next nine digits are the individual account number, and the final digit is a validity check code.
Both of these standards are maintained and further developed by ISO/IEC JTC 1/SC 17/WG 1. Credit cards have a magnetic stripe conforming to the ISO/IEC 7813. Many modern credit cards have a computer chip embedded in them as a security feature.
In addition to the main credit card number, credit cards also carry issue and expiration dates (given to the nearest month), as well as extra codes such as issue numbers and security codes. Not all credit cards have the same sets of extra codes nor do they use the same number of digits.
Uses
A credit card is issued by a credit card provider, like Capital One, and they are designed to pay for things in shops or online. You can also use credit cards for balance transfers and taking out cash (also known as cash advance or cash withdrawal) from an ATM. ... the minimum amount you must pay.
Then there are other reasons when paying with credit isn't better, and they have to do with you and your spending habits. Using a credit card may not be right for you under the following circumstances:
- You can't pay your credit card balance in full and on time. If this tends to happen to you, stick with the debit (or cash) to avoid racking up interest.
- You tend to spend more than you can afford. Paying with debit will limit you to spending money you've already earned.
- You can only get a credit card with a very low credit limit and you have a hard time staying under the balance.
The fees for exceeding your credit limit are costly, and doing this can also put a dent in your credit score.
When you get a credit card you will be given a credit limit. This is the total amount you have available to spend using the credit card. You should always leave some available credit on your credit card for any interest to be applied.
Details of all transactions you make will be shown on your statement, along with:
- the minimum amount you must pay
- the date by which your credit card provider must receive at least your minimum payment
If you do not pay off your balance in full each month, you will be charged interest on the amount remaining on your account. Check your credit card agreement to make sure you know how much you will be charged.
There are a lot of credit cards out there today; in fact, it seems there are new credit cards popping up all of the time. There may seem like there is a lot of choice, and it can be a little daunting. All credit card providers are slightly different, so it's worth taking the time to find the best match for you.
Some credit cards are great for making purchases, some offer deals for balance transfers, but one thing all credit cards have in common is they need to be used sensibly.
To apply for a credit card you have to be at least 18 years old, and your application will be based on a number of factors including your credit worthiness.
Each credit card provider will be looking for different things but they will all look very closely at what you say on your application form and your credit history. Remember, when applying for credit cards always:
- Check the eligibility criteria - this will give you some idea of whether you are likely to be accepted or not
- Answer all the questions truthfully, remember lying on your application form is fraud
Features & Benefits of Using Credit Card
1) Cashback: Many banks offer cash back opportunities if you use your card to pay monthly bills (electricity) or for grocery purchases. Besides, online shopping portals too have cash back offers on various products.
2) Reward points: Credit card companies offer reward points for any purchases you make with your card. For example, Bank gives 2-5 reward points for every Rs 150 spent using your card. You can then use these points to purchase gifts (available on the company’s rewards page).
3) EMIs: If you are making a big-ticket purchase (TV, refrigerator, laptop,etc), you can easily convert it to affordable monthly instalments. Banks usually charge interest for conversion to EMIs.
4) Grace period: One of the main advantages of using a credit card is you can defer your payments till your bill your due. Banks offer a maximum 50-day grace period for paying back your dues.
5) Safety: Credit cards are safer than debit cards as in case of fraud you are not out of money immediately. Payment gateways like Visa, Mastercard also offer additional password protection while using the cards online.
Benefits: Some cards offer privileges/good deals for specific purposes like petrol purchases, dining, air miles etc. If you want to take advantage of these offers, you make opt for a second card.
Types of Credit Card
Credit cards come with different fees, interest rates and reward programs. You need to check for the ones best suited to your needs while applying for one. Here are the different types of cards offered by banks, other financial institutions:
1) Standard Credit Cards: These are general purpose cards that are most commonly issued to users. They need no deposits and credit limit is decided by the credit card.
2) Premium Credit Cards: These are the gold and platinum cards. They come with more offers and come with higher credit limits. Some perks might include concierge services, exclusive airline lounges etc.
3) Secured Credit Cards: To use secured credit cards, you need to deposit money with the company. Your credit limit is decided based on the deposit. These cards usually have higher rates of interest and an annual fee. They are mostly used by people with a tarnished credit history.
4) Prepaid Credit Cards: Here, the user loads the card with money. It is similar to a debit card expect that it is not tied to a bank account.
5) Specialty Credit Cards: These cards are offered through affiliations and partnerships with major brands. For example the PVR Card offers two free movie tickets at PVR screens every month on spending Rs 7,500 per month.
Security
Credit Card Security & Fraud Protection. Visa. From online shopping to in-store purchases, Visa offers comprehensive support to ensure the security of your transactions. Designed to help you keep your transactions and personal information safe.
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