CREDIT CARDS- BENEFITS WITH LIABILITY

CREDIT CARDS- BENEFITS WITH LIABILITY

Credit cards are the plastic money that could be used almost anywhere these days. A credit card represents a line of credit.

Credit Cards- A Short Note

A credit card represents a line of credit, i.e., a repetitive borrowing by the customer from the bank which has to be repaid to the bank on a specified day. A credit card authorizes the purchase by the customer on credit.

Each credit card comes with a limit of money that can be used to make purchases; these are like credit purchases for which the customer will have to pay at the end of the month. The credit that one gets on credit card is like a credit taken from the bank and one has to pay a charge on it which the interest on the credit so taken, if the dues are not paid on time on the specified date.

Credit cards are the plastic money that could be used almost anywhere these days. One can pay through cash, cheque, net banking or debit card or even a credit card almost everywhere in the country.

Parts of a Credit Credit

Credit cards are the plastic cards that are issued by the banks to the account holders on request by the customers. A typical credit card has a 16 digit number on it, the expiry date, the customer’s name and the issuing bank’s name. It also has a chip on the face of it that helps identify all transactions and sends the information to the relevant bank.

Hologram : It is a golden color 3D image to identify a real card.

Issue Date: This is the date on which the card was issued. Few cards may not have this date.

Expiry Date: This is the date post which the credit card is no longer valid. One may need to procure a new card after this date.

Cardholder’s Name: This is the name of the person to whom the credit card has been issued.

Card Brand Name: This is the credit card company that makes these cards. Examples include Visa, MasterCard, Maestro, Rupay, American express, etc.

Card Number: This is a unique 16-19 digit card number that gives a separate identity to each card.

Issuing Bank: This is the name of the issuer bank.

Magnetic Strip: This is a black color strip on the back side of the card that identifies the card when swiped.

Signature Box: There is a box that contains the signature of the cardholder to ensure that transactions are done by him.

CVV: This is a 3 or 4 digit verification ccode called as Card verification value needed while making the transactions.

Advantages of Credit Card
  1. It is a safe and convenient way of carrying the money.
  2. It’s the form of plastic money, carrying no physical money;
  3. We get record of all the transactions done.
  4. Some banks provide cards with interest free credit period. 
  5. It is very helpful in case of emergency where you need some money urgently to meet any kind of financial commitment.
  6. Credit cards earn reward points on their use which could be redeemed by the customer.
  7. Various websites and online portals also offer discounts on payment made through credit cards and thereby help you getting goods or services cheaper than if you had paid via debit card or any other way.
Disadvantages of Credit Card
  1. In case of default in bill payment on a particular day, one may have to face a very high rate along with other charges. It also spoils your CIBIL score. 
  2. If credit card is used for withdrawing cash, then also one has to pay penalty on per day basis until the withdrawn money is paid back. 
  3. In case of theft of credit card, there are high chances of losing money on international transactions done as no OTP is required on international transactions. One must immediately ask the issuer bank to stop the transactions on the credit card in case of theft. 
  4. The credit card may lead to over spending as one has time to pay later on a credit card.
How to Procure a Credit Card?

Credit card can be procured through any bank. The limit of the card would be decided based on your salary or income and also based upon your CIBIL score. One should be 21 years or more to be eligible to procure a credit card.

There are multiple types of credit cards with differentiating features. One may need to choose the kind of credit card suited and apply for it. The documents that may be required for procuring a credit card are identity card, address proof, income statements and if you already have an account with the bank then these may not be necessary.

After procuring a card, one may need to activate it using a personal identification number (PIN) which would be sent by the issuing bank on your registered mobile number. Once it is activated, the PIN can be changed at the nearest ATM.

The Bill and payment of Credit Card

Once the customer makes a purchase on a credit card, the bill is generated in few days and has to be paid after certain number of days. One can make the payment of minimum amount or the whole amount. The payment can be made online, offline or through a payment bank.


EDITED BY AKANKSHA AGGARWAL