We’re usually skeptical about things we do not understand. Research says that most of us have misgivings about Credit Cards, usually because we know very little. We’re stepping in to make things better. Here’s a simple guide to how Credit Cards really work:
A Credit Card lets you spend money on credit. You can spend up to a pre-set credit limit, which is defined by the bank depending on several factors like your income, credit history etc.
No Interest If You Please
If you pay off the outstanding balance on your card before the due date IN FULL, no interest will be charged (except for cash withdrawals, where interest is usually charged on a daily basis from the day you take your cash).
Statement & Balance
A monthly statement is generated with details of your transactions and balance. If you do not pay off any outstanding balance in full every month, then interest will be charged on the remaining amount. The interest varies across banks.
You are, however, required to pay a minimum due every month which is usually 5% of the outstanding balance. As long as you pay this this minimal amount every month, your card is functional and won’t be blocked by the bank.
A late-payment fee is charged if you fail to make a payment within the due date. This also has an adverse effect on your credit history.