What Is Credit Card?
Credit Card or Plastic Money is a payment card issued to users to pay a merchant’s for their goods and services, based on the customer promise to the bank for the repayment the amount with agreed charges.
The Banks creates a revolving amount and grants a credit limit to the customers.
From this credit limit, the customer can borrow money for payment to a merchant, online transactions, pay the bills or can use a cash advance.
A credit card is a little bit different from the charge cards.
A customer can use a credit card as per their needs and repay the amount within the interest-free period or in Easy Monthly Instalments with a nominal Rate of Interest.(If Bank allows customer to pay in parts)
While in charge cards customer have to repay the full balance each month within the time limit.
Credit Card Payment Gateways
Most of the credit cards come with the third-party payment systems like Visa, MasterCard, Discover, Dinners etc. While few cards like American Express uses its own payment gateway called Amex.
Visa & MasterCard card come‘s with 16 digits unique card no. and Amex & Dinners comes with 15 & 14 Digits.
Application & Approval
Each bank is having their own credit card application and approval criteria. But the most of the bank prefer to apply with relative documents.This could be different as per bank, card & process.
Private Sector Banks & Multinational banks also offer online application & instant approval process to the customers where customer receive calls from bank representative for documents if the card gets approved.
After documents collection bank process customer card and used customer credit history to decide card limit.
Sometimes bank also uses third party vendors to verify customer data. Included job profile, monthly income, residence, existing debts and pending if a customer has.
Bank also use credit reporting agencies to shortlist customers.
In India, Credit Information Bureau India Limited ( CIBIL) keep customers credit data and bank use CIBIL Report to cross-check customer credit trust.
Credit Cards Grace Period
A credit card’s grace period is the time in which the cardholder has to pay the balance before interest is assessed on the outstanding balance.
Grace periods may vary but usually, range from 20 to 55 days depending on the type of credit card and the issuing bank. Some policies allow for reinstatement after certain conditions are met.
If a customer is paying the balance after the due date, some extra finance charges will be added in the bill and grace period will not apply.
After grace period ROI charges will be different in each bank. In some cards, extra charges will not be applied to the existing or outstanding balance. Where the bank has already added fines in the last bill.
Bank usually waived off interest charges if the customer paid the amount within the grace period. Where customers have to pay their uses only.
But the bank will charge extra interest or late fee if the amount is not paid within the time limit.
Credit Card Types
- Business Credit Cards
The business Credit card is a special card issued to the registered business and organizations. These cards can be used for any business purpose.
- Secured Credit Cards
Secured credit card is secured by any fixed security deposit or account owned by the card user.
In India customer can get this card against a Small Fixed deposit start with 20K even if your existing credit score is low.
In the case of any default and no payments situations, Bank will withdraw bills from your secured amount.
- Digital Credit Cards
A digital card is a digital cloud-hosted a virtual representation of any kind of identification card or Credit Card, which we use on the normal basis.
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