A credit card is a type of payment card that allows the user to use the bank’s money within a certain limit. The maximum amount that a customer can use depends on their monthly income and credit history.
The user using a credit card uses not his money (as is the case with a debit card), but the bank’s money. This means that after the billing cycle has finished, it will have to return the borrowed funds.
Credit Card How Does It Work?
The credit card operates on the basis of a revolving loan and is a separate bank product that does not need to be associated with a personal account in any way. Therefore, it may happen that you will have a personal account and a debit card in one bank, and a credit card in another, because it will be cheaper there, or you will get a higher credit limit.
How do you use a credit card?
First of all, wisely. You must remember that the funds available within the limit are loans, so do not reach them unnecessarily. If you happen to use them, watch the so-called interest-free period. This is the time when the bank does not collect any interest on transactions carried out and is divided into two stages: the settlement cycle and the time needed to pay off the debt.
The billing cycle usually lasts a month and ends with a summary of all transactions made by the bank. The next stage is time to pay off the debt. As a rule, it lasts 20 days and during this time you must repay the entire debt. The credit card is repaid via electronic banking. An account will be assigned to your card, thanks to which you will be able to pay off the debt with one click.
Credit card numbers
Each credit card, in accordance with the standard ISO, should have the following information: name of the bank that issued the card, chip, expiry date of the card, name of the owner or company name, logo of the payment organization, credit card number and information about contactless payment.
The credit card number should consist of 16 digits written in 4 blocks. The first informs which industry the institution that issued the card comes from, the next 6 digits are the publisher’s identification number, the next identifies the personal account number, and the last has a control task.
Credit Card – Fees
How much you finally pay for the issue and use of a credit card largely depends on the bank’s offer. Therefore, before submitting your application, check the latest credit card ranking and compare interest rates, check the amount of the fee for issuing the card and how long the interest-free period lasts.
Credit Cards Ranking
The most severe fee we will face is interest, which amounts to around 10% per annum. In addition, you must take into account such fees as:
- card issuing fee (one-off),
- card possession fee (monthly or annual),
- card insurance fee (usually not necessary),
- credit card transfer fee,
- commission for carrying out cash transactions,
- commission for withdrawing funds from an ATM,
- fee for exceeding the limit.