A credit card is a payment system used to borrow money or buy products and services on credit. It is a plastic card that entitles its owner to buy goods and services which is expected to be repaid within a stipulated time. It is credit provided to the card holder by a bank. In effect a credit card gives the card holder a loan for the amount of purchases. Most credit cards are issued by banks and has a standard shape and size. Using credit cards is an easier way to shop and make payments to merchants or take cash advances. Credit cards help you in case of an emergency when cash is not available on-hand. For a business, accepting credit cards can result in higher generation of profits and further expansion of client base in a very short time as this instrument allows customers to pay for the purchases in case of shortage of cash.
Credit card is essentially a double edged sword as it can be used for multiple purposes including reserving hotel rooms, rental cars, and airline tickets. Also, credit cards help build your credit history, which is important if you ever make major purchases such as cars or a home. Credit cards allow a lot of flexibility as they allow you to make purchases on credit without carrying around a lot of cash. They allow convenient remote purchasing – ordering/shopping online or by phone. They allow you to pay for large purchases in small, monthly installments.
However, going overboard with purchases through your credit card can get you in troubles and affect your credit history. For example, if credit card dues are not paid on time or by the due date, then you will have to bear the interest charges and other charges like late payment fees in case your payments are late. This can also affect your credit history. A bad credit history can become a stumbling block when buying bigger assets like a car or a home. If you have a good credit history and you make all of your monthly credit card payments on time then it will be easier for you to get approved for any other kind of important loan that you need in the future.
There are different credit cards for every consumer’s varying financial needs. A standard credit card is the most common type of credit card that allows you to have a revolving balance up to a certain credit limit. Premium credit cards like Gold and Platinum cards allow you to enjoy incentives and benefits like back, reward points, travel upgrades and such other rewards to cardholders. Business credit cards offer business owners an easy way of separating business and personal transactions.
