Whether at home, in an office, learning institution, or any other place that we need cash, we always look forward to having the quickest way to make our daily procurement. The use of credit cards has proved to be convenient since regular purchases are anytime and, in any location, often. This card makes it easy for us to pay for groceries, fuel bills, accessories, electronics, and can cater for traveling packages since we have enough cash with us for such things in most cases.
How Does a Credit Card Work?
It is important to note that credit card use is equivalent to getting a loan from a bank that must be repaid with interest whenever we make a transaction. These loans attract annual percentage rate (APR). The interests incurred will be charged as per the conditions of the company issuing the this card. The APR is arrived at by looking at the client willingness to repay the loan, the credit score, and the type of our credit card. Individuals with good credit records are bound to have low amounts than those with minimal or no credit record.
Our debit cards are interconnected to the checking account. They are then debited from our account balance, creating a significant distinction between a credit card and a debit card. Irrespective of how long we use debit cards, monthly charges or interests’ rate are not charged. Once the available balance is exhausted from the debit card, we are left with no money and cannot do any purchase like we could do with a credit card.
However, all banking institutions have credit limits for every individual. This credit line limit prevents us from getting further credit from what the bank thinks is enough for us. The credit line’s determinant is measured through our earnings, our credit history, and the existing credit.
Importance of Credit Cards
Credit cards have several benefits for both individuals and business people. They include:
Earning Rewards for Example Points for the Miles and Cash Back
Using a credit card is a reasonable transaction method among several powerful tools for anyone looking forward to earning rewards, handling emergency cases, traveling, developing credit, and unforeseen costs. The credit card rewards are awarded to the cardholder after every purchase is completed. The tips can differ significantly depending on the creditor and the kind of card each of us uses. These kinds of rewards may be in the form of receiving discounts in places such as petrol stations, cashback, and the miles we might travel. The person who manages to use a card as a routine benefit more than the rest. Some of the new credit card offerings from SoFi allow you to earn rewards in the form of cryptocurrencies like Bitcoin, meaning that their card really is on the cutting edge of the financial industry. Of course, there are other benefits of opting to use this particular card, including better saving and investing options, as well as being able to pay down debt.
It Increases Our Purchasing Power
Notably, credit cards are quite helpful, especially when one is traveling. The reason being that most car hire service providers and hotels necessitate for one to have a credit card for reservations. This can go for days or more and may make us run out of money on our debit cards, leaving us with nothing to use. A credit card tends to give us purchasing ability in a scenario like this one by offering us the much-needed money at that point.
We Get Protected Against Any Possible Credit Card Fraud
Credit card providers usually send alerts to clients informing them of any fraud. The alerts serve as a safety precaution in preventing theft and ensuring whoever is transacting using the card is the rightful owner. The alerts come in the form of phone messages, emails, or even a phone call. Without the details from the credit card company, individuals cannot make a successful transaction.
Responsible Ways of Using a Credit Card
Like the rest of the financial products, the cardholder can only benefit from it when used responsibly. Once we get the card, it’s upon us to always make plans and decisions on how it will be beneficial to us and plan to make the bank payments. There are online resources available for interest and payoff period estimates, such as the credit card interest calculator which helps out.
Requirements for Credit Card Application
Does any one of us intend to make a credit card application? If yes, the following are needed?