Getting your first Credit Card is a big step towards financial responsibility. If you’ve just received your Credit Card, you must be confused about all those fancy terms in the welcome booklet. Let’s help by decoding them for you. Even if you haven’t got a Credit Card yet, this information will be useful for you to know. Read on and you’ll be one step closer becoming an expert on everything about Credit Cards.
How much can you spend on your Credit Card? This is called the Credit Limit. This is the maximum amount that you can spend on your card. A Credit Limit is assigned to your card by the card issuer. Remember, the usage rate on your card should not be more than 30% of the total limit given to you.
Wait, don’t get confused between cash limit and credit limit. A cash limit is the total amount of cash you can withdraw from the ATM using your Credit Card. That’s similar to a Debit Card, right? Well, no. A cash limit on your Credit Card has a high rate of interest on the amount. The interest is calculated from the day you withdraw the cash to the day you repay it.
Finance charges include a monthly and annual rate of interest charged for delayed outstanding payments on your Credit Card. If you clear the total outstanding amount on your Credit Card within the billing cycle, you don’t need to pay interest on your card.
A billing cycle is the time period between your Credit Card billing statements. Your card issuer will inform you about the billing cycle and Credit Card statement dates when your card is issued.
Minimum Amount Due
This is the minimum amount that you should pay within the due date. The minimum amount due is usually 2-5% of the total outstanding amount on your Credit Card.
Additional Reading: Tips to Use Your Credit Card Wisely
This is the date by which you should pay your Credit Card bill. If you cannot clear the total amount due, you must at least pay the minimum amount due. In case you pay your bill after the due date, you will be charged a late fee. This will also reflect on your CIBIL report.
Just in case one of your transactions is not processed and is declined, the amount that was charged to your Credit Card is credited back to you through a reverse credit entry. This is a charge-back.
Late Payment Fee
Missed a payment deadline on your Credit Card? This is the fee you need to pay if you pay your minimum amount due after the due date.
Cash Back is the rewards program on your Credit Card by which you get back a percentage of the total amount spent on your card. To get Cash Back benefits, you must use your Credit Card regularly and clear your outstanding amount every month.
Balance Transfer is the process by which the outstanding amount on one Credit Card is moved to another card issuer. This is usually done to reduce the interest charges for you, the cardholder.
Credit Verification Value
Have you ever wondered what that 3-digit number at the back of your Credit Card is? This is called CVV and is useful to verify the legitimacy of a card. You use your CVV number while making online payments.
We’ve given you an overview of a few important Credit Card terms which you will find useful in understanding how your Credit Card works.
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