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Introduction to credit cards: What is credit?
Credit is a loan. So if you are availing a credit card, it means
you are taking a loan from the lending organization.
Once you are given a credit card, a credit limit is set up to
which you can use you're your card to make purchases. You will
be sent a bill monthly. You are required to pay a minimum balance.
There will not be any interest payable if you pay the entire
bill on or before the due date. Else you will be charged interest
at a predetermined annual percentage rate (APR),
It is a good practice to clear the entire bill, as the interest
rates on the credit will be very high.
If used wisely, a credit card can provide convenience and allow
you to make purchases with more than a month to pay without any
interest charges to you.
Although the above statement looks attractive, it is very difficult
to practice. Most of the credit card holders carry forward the
payment and are charged up to 2.95% each month on the outstanding
balance. This many a times ruins one's financial health. |
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