FEATURES OF CREDIT CARD

.1)Alternative to cash

Credit card is a better alternative to cash. It removes the worry of carrying various currency denominations to pay at the trade counters. It is quite easy and way fast to use a credit card rather than waiting for completion of cash transactions. As an alternative, credit card helps a cardholder to travel anywhere in the world without a need to carry an ample amount of cash. It also reduces the possible risk of money theft and gives its user a complete peace of mind.

2. Credit limit

The credit cardholder enjoys the facility of a credit limit set on his card. This limit of credit is determined by the credit card issuing entity (bank or NBFC) only after analyzing the credit worthiness of the cardholder. The credit limit is of two types, viz., 1. Normal credit limit, and 2. Revolving credit limit. Normal credit limit is usual credit given by the bank or NBFC at the time of issuing a credit card. Revolving credit limit varies with the financial exposure of the credit cardholder.

3. Aids payment in domestic and foreign currency

Credit card aids its cardholder to make payments in any currency of choice. In other words, it gives its holder a unique facility to make payments either in domestic (native) currency or if necessary, also in foreign (non-native) currency, that too as and when required. Credit card reduces the cumbersome process of currency conversion. That is, it removes the financial complexities often encountered in converting a domestic currency into a foreign currency. It is because of this feature, a credit cardholder can possibly make payments to merchants present in any corner of the world.

4. Record keeping of all transactions

Credit card issuing entities like banks or NBFCs keeps a complete record of all transactions made by their credit cardholders. Such a record helps these entities to raise appropriate billing amounts payable by their cardholders, either on a monthly or some periodic basis.

5. Regular charges

Regular charges are basic routine charges charged by the credit card issuing entity on the usage of credit card by its cardholder. These charges are nominal in nature. The regular charges are primarily classified into two types, viz., 1. Annual charges, and 2. Additional charges. Annual charges are collected on per annum or yearly basis. Additional charges are collected for other supplementary services provided by the credit card issuing entity. Such services include, add-on-card (an additional credit card), issue of a new credit card, etc.

6. Grace period

The grace period is referred to those minimum numbers of additional days within which a credit cardholder has to pay his credit card bill without any incurring interest or financial charges.

7. Higher fees on cash withdrawals

Credit-card issuer makes charges on cash withdrawals made through credit card at the ATM outlets and other desks. Generally, cash withdrawal fees are quite higher than fees charged by the bank or NBFC for the other regular credit transactions. On cash withdrawn done through a credit card, interest is charged from the same day. That is, interest is charged since the day on which cash is withdrawn. Usually, no grace period is provided for cash transactions.

8. Additional charges for delay in payment

The credit card payment is supposed to be made within a due date as mentioned on the bill of a credit card. If payment is not paid on time, then a credit-card issuer charges some additional costs, which are resulted due to delay in payment. These charges are charged to compensate (recover) the interest cost, administration cost and any other related costs bared by the credit card issuing entity.

9. Service tax

Service tax is included in the total amount charged to the credit cardholder. This mandatory service tax imposed by the government also increases the final end cost bared by a credit cardholder. Many credit card providers (issuing entities) have policies of reversing the service tax charged on the purchase of gas, fuel and other similar goods.

10. Bonus points

The competition among the credit card providers is unbending (adamant). Offering various incentives is usually a trendy (fashionable) way to improve the sale of the products in the ordinary course of business. Following this trend, credit card providers also give bonus points on the financial value of the transactions compiled by their customers.

11. Gifts and other offers

At a later stage (i.e. after crossing pre-determined number of bonus points) accumulated bonus points are redeemed either by converting them into gifts, cash back offers, or any other similar compelling offers. To collect many bonus points, the credit cardholder has to carry out a considerable number of transactions through his credit card.

Conclusion on Credit Card

Based on discussion made above, we can conclude that, Credit card is the outcome of comprehensive banking functions. Credit card is very convenient financial short-term lending facility available to a credit cardholder. However, the safety and security of the credit card are also of prime importance. These depend on the physical protection of the credit card as well as in the isolation (confidentiality) of the credit card number, card value number (CVV), personal identification number (PIN) and other sensitive credentials of the credit cardholder.

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Type of Credit Card:

Many credit card users, beginners and even experienced users, are unaware that there are several types of credit cards. Here are just a few of the most well-known types:

Standard credit card Premium credit card Store credit card Secured credit card

Credit Limit:
Your credit limit is the maximum amount you can charge on the card. This includes purchases, balance transfers, cash advances, finance charges, and fees. When you go over your credit limit, your creditor may charge a fee, an over-the-limit fee.

Balance:
The balance on your credit card at any given time is the total of your purchases, finance charges, and credit card fees. The higher your credit card balance, the lower the available credit you have to make additional purchases, unless you have a charge card or no-limit credit card. Higher balances raise your credit utilization and lower your credit score.

APR:
The annual percentage rate (APR) is the interest rate applied a balance carried beyond the grace period. Credit cards can have different APRs for different types of balances, e.g. balance

transfers or purchases. Balance transfers and cash advances usually have higher APRs than for purchases. Your APR may increase when you're late on your payment to a particular creditor, and other creditors if your card agreement includes a universal default clause. APRs can be fixed or variable. A fixed APR can change, but the creditor must inform you in writing before changing the rate. A variable APR changes from time to time.

Grace Period:
The grace period is the amount of time you have to pay your balance in full before a finance charge is applied to your purchase. If you carried a balance from the previous month, you may not have a grace period for your new purchases. In addition, balance transfers and cash advances typically do not have a grace period. When balances don't have an applicable grace period, interest is applied right away. To find out the length of the grace period refer to the credit card application or your credit card agreement. Your monthly statements should also include the number of days in the grace period.

Finance Charge:
The finance charge is the cost of carrying a balance. Finance charges are computed using your balance and APR. Creditors use different methods for calculating your finance charge. They may consider one or two billing cycles, use an adjusted, average, or previous month's balance, and may include new purchases. The least expensive to you is the average daily balance method excluding new purchases. In cases where you must pay a finance charge (no grace period applies), your creditor may assess a minimum finance charge. If your calculated finance charge is less than the minimum, you must pay the minimum.

Incentives and Rewards:

Some credit cards offer rewards and incentives for using their credit card. Rewards come in several different forms: cash back, points to redeem, and discounts. Credit Card Rewards

Credit Card Fees:

There are different situations that you might incur credit card fees. Annual fee, finance charge, late fee, and over-the-limit fee are some of the most common fees.

Common Credit Card Fees Related Articles

Avoid Finance Charges - How to Avoid a Finance Charge Credit Card Grace Period - What is a Grace Period Credit Card Finance Charge Definition - What is a Finance Charge Required Credit Card Disclosures Choosing Credit Cards - How To Choose A Credit Card