A credit card is a simple and convenient way of making purchases and postponing the payment for them. In simple words, using a credit card for your purchases means using someone else’s money keeping in mind that you have to return this money as per the due dates. While paying with cash there is a certain psychological barrier that doesn’t let people spend all of their cash, whereas it is generally noticed that people end up spending more money than what they actually even have.
These days, credit cards are not just a means of postponing a payment but it is actually used because of the various benefits and rewards it comes with. Every credit card comes with its own unique rewards that a user can get by making purchases via his/her credit card.
Credit cards are both, loved as well as hated. Credit cards are just like a tool and if a tool is handed to a person who doesn’t know how to use it he will probably end up with a bad experience. People who know how to use credit cards and how to redeem their rewards are the ones who can make the best use out of them.
Banks provide credit cards to those people only who are considered able to pay back the money. There are various ways by which a bank can check whether a particular person will be able to pay back his debts or not. For example, checking their credit score, income source, past record, etc. If a person’s credit score is below 550 then the bank charges higher commission from him because the bank’s lending risk is higher as compared to a person who has a higher credit score.
Majorly there are four types of credit cards. These are Secured Credit Cards, Low Interest Credit Cards, Rewards Credit Cards and Balance Transfer Credit Cards.
Secured Credit Cards : Secured Credit Cards are for people who have a very bad credit score or those who don’t have a credit score at all. In order to obtain a secured credit card, the customer has to deposit an amount which is equal to 100-200% of his credit limit before hands. Say you have a credit limit of 1000$ then you have to deposit 1000$-2000$ with bank. This card helps in building the credit reliability and eventually obtaining an unsecured credit card.
Low Interest Credit Cards : Low Interest Credit Cards as the name suggests is a card which has a comparatively low interest charges. This card is for those people who generally carry forward their credit debts month to month. With this card, you are only required to pay a minimum amount for the late fee to be waived off and the rest of the amount can be carried forward to next month with minimum interest rate on the amount.
Rewards Credit Card : Obviously, as the name implies, Rewards Credit Card provides the user with unique rewards that can be redeemed every month. This card is generally suited to those people only who pay their debts on or before due date every month to enjoy the rewards that comes with it. These rewards are generally flat 1%-3% cash back on purchases or free movie tickets, etc.
Balance Transfer Credit Cards : This card is for those people who already have a lot of credit debt in their credit card. With this card they can easily shift their debts from one card to a new one which further provides them 6 months to 21 months to clear these debts. Usually a onetime fee is charged to transfer the debts which can be up to 5%.