The aspects to be considered for sensibly using credit cards

The competition of monetary transactions by using cards is quite common. There is an array of payment cards which are available in the market. The most common type of payment card that is often used by individuals is a credit card. As the name suggests a credit card is a type of payment card which is issued by a company to an individual. In the case of credit card, an amount of money is loaned to the individual who has issued the card. This amount is known as the credit amount. The individual who has the credit card can use it for making purchases or paying bills in places where the credit card of that specific company is accepted. When the card is issued, there is a maximum credit limit that is outlined by the card issuing agency the individual cardholder. The upper limit can also be determined by the, but it cannot exceed the cap amount that is given by the credit providing company. This means that the credit limit can be lower than the offered limit of the company if the individual desires so but cannot be higher than the limit given by the credit agency.

The process of obtaining a credit card

When a person wants to apply for a credit card, then a suitable credit card providing companies have to be chosen for placing the application. It is important to evaluate a few factors before choosing a credit card providing company. Some of these factors are given below:

  • The global acceptance of the issued credit cards:

When credit cards are acquired, it is important to ensure the acceptance rate of that specific type of card. It is known that a credit card can only be used in places where that company’s card is accepted as a payment mode. Hence just knowing the acceptance of credit card payment is not enough but knowing which company’s credit card is accepted is more important. Some credit card companies are known to be globally accepted. If a person simply wants a credit card, then this becomes an important factor because this implies that the credit card can be used for making payments in a majority of transactions both online and offline. However, if a person wants a credit card for a specific purpose or wants to do shopping from a specific merchant then looking for credit cards given by that merchant for shopping in their outlets is a good idea. If a person wants to shop at CITGO then having a CITGO credit card will ensure a better shopping experience. More incentives can also be gained by shopping with such cards.

  • The interest that is levied for paying the balance:

The calculation of interest is one of the most important financial factors when it comes to the usage of credit cards. The interest rate that is levied on the payments made through credit cards vary greatly upon the company that has issued the credit card. However, there are credit cards that have deferred payment options which mean that the interest that has to be paid on the credit amount is set aside for later payment. However, choosing the credit cards having deferred interest payment option should be measured against the fact that once the deferred period is over the interest will be charged on the original credit amount in case the cardholder fails to clear the dues within the deferred period. This means a lot more has to be paid if the outstanding is not completely cleared within the prescribed period as interest will be calculated on the taken credit and not on the outstanding amount.

  • The duration of the grace period:

The credit card providing companies also give the cardholder a grace period for paying the borrowed amount in full. During this grace period, there is no interest charged on the borrowed amount. The grace period also varies depending upon the card issuing agency and can be around twenty days or two months. However, many credit card agencies do not provide any kind of grace period to thes, and as soon as the credit is taken, then the interest is applied as per the agreement terms and conditions. There is a due date for making payments, and a minimum amount is also kept for each installment. However, if a person fails to give the minimum amount within the first due date, then additional penalties are levied on the outstanding amount. The credit card companies that provide grace period can also cancel this grace period if the cardholder has been defaulting in making payments. The presence of outstanding amount from a credit transaction will automatically make the grace period null and void for the next credit transaction.

  • The kind of credit card that is needed:

There are different types of credit cards which are used for different purposes. There are personal credit cards as well as business credit cards. The personal cards are used for individual purposes while the business card that is registered under the name of a specific business company can be used for only business payments. There is also another type of credit card which is secured by connecting it with a savings bank deposit. The suitability of this type of credit card can be understood for the card issuing companies because they have a security deposit for recovering unpaid outstanding balance.

On the other hand, it will also prevent the card users from becoming lax towards credit card payments. According to the credit card that is chosen there are also benefits present with those cards because there are also credit cards that offer rewards and other forms of incentives. Hence along with the type of card, it is also important to look for the incentives given with the card.

Hence, selecting credit cards for making payments should be done after careful evaluation so that full advantage of such cards can be taken.

Written by nikola

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