A credit card is a small card made of plastic issued by a financial organization like a bank or credit union. In this procedure, the card issuers help to create a revolving account with the help of a line of credit for the consumer. Through a credit card, the cardholders are able to purchase goods and services. Until they reach the predetermined credit limit, the cardholder can receive advance cash. Most of the main merchants accept payments through a credit card; they generally receive their payments through the bank issuing the card. Through monthly payments, the cardholders repay the bank. If the cardholders do not pay the whole amount back in full, the issuer generally charges the high rate of interest on the unpaid portion.
A credit card can be an extremely useful tool if it is used perfectly. If not, it can cause big issues for cardholders who don’t have the self-discipline to control debt.
Which Type of Card Is Right for You?
If you travel by plane every month or every week, then Frequent Flyer Miles can be extremely helpful for you. If your job or personal business lets you to go on the road every day, then you can use the credit card for purchasing fuel or gas. It makes much more sense to utilize a credit card which allows you to get money back or some type of fuel incentive by which you can save some amount of money.
Reward Points –
These kinds of cards allow you to earn a specific number of points for certain transactions. You can use these points on items like motels, purchasing gifts, flights, merchandise and money back.
Cash Back –
These types of credit cards allow you to get 1% of cash back for all types of expenditures. Some of them provide a special percentage rate such as 5% cash back for the merchandise from particular establishments. You will most likely get a limit – a certain amount which you generally earn for a month or year.
Airline or Flyer Miles –
These types of credit cards are the same as Reward Points credit cards. For every dollar spent, a certain quantity of miles are generated for you. For a specific amount of the money, you can use it for your hotel accommodations or car rentals.
Fuel Cards –
These kind of credit cards are also similar to Cash Back cards. Through this card, you will earn a specific percentage of each dollar.
Advantages of Using a Credit Card:
Convenience
The credit card is considered to be one of the most flexible payment tools accepted at more than 30 million places all over the world, because it is a good alternative for cash. Sometimes a situation arises where you need more funds than what you immediately have. Emergencies like car repairs, home fixings, medical expenses, and emergency travel are resolved immediately with a card. Credit spending has to be done on a short-term basis while making appropriate payments to avoid accumulating a huge amount of debt.
Establish and Boost Credit History
Always try to pay your credit card bills in full and on time. It will demonstrate your responsibility which helps you to boost your credit rating. A good rating also helps in emergency situations, as well as getting a loan with a low interest rate. In most cases, the card company will approve a high credit limit.
Borrowing Interest Free
Credit cards allow the user to utilize the interest free debt within the grace period. So, payment for purchases through a credit card is due at the end of the predetermined period. If you pay your balance in full every month, you can gain an interest-free loan.
