A credit card is one of the most preferred financial tools and comes with some impeccable benefits through offers and discounts. Using a credit card essentially is similar to getting a pre-approved short-term loan and is interest-free when you repay the sum within the due date. You can also convert your sum into easy instalments, accruing some interest.
If used correctly, credit cards can help you manage daily finances effectively without any liabilities. However, undisciplined use of credit cards can also land you in massive debt. Therefore, as a new user, you need to know about various credit card aspects. In the article below, you will learn how to get a credit card, various types and ways to use it efficiently.
How does a credit card work?
A credit card provides pre-approved and short-term loans for up to a set limit known as the credit limit. You receive the bill at the end of every billing cycle on your expenses. If you pay the amount in full before the due date, you don’t require to pay any charges. You can also pay your credit card bills in instalments by paying a set interest rate monthly from the date of purchase.
The bank also sets a minimum monthly payment based on your outstanding amount. It includes various charges and interests and usually constitutes 1% of your outstanding balances. Paying your card bills in full before the due date is advisable to avoid any charges.
The banks and card issuers offer numerous types of credit cards, and you can opt for the one based on your expense trend and spending habits.
IDFC FIRST Bank offers a comprehensive range of credit cards that you can choose from as per your requirements and enjoy a range of shopping, travel, entertainment, and lifestyle offers. IDFC FIRST Bank credit cards come with a plethora of offers, benefits, rewards and privileges and are lifetime-free, meaning you do not need to pay any annual fee for their credit cards. The bank also offers one of the lowest interest rates, known as Annual Percentage Rate (APR) starting at as low as 9% per year, and the lowest service charges.
Things you need to know about a credit card
Here are a few things you need to know about credit cards before applying for a credit card:
- Annual charges
You may need to pay a yearly membership fee to continue using your credit card.
- Credit limit
It is the maximum amount you can spend using your credit card.
- Billing cycle
It is the period in which your expenses are compiled, and the total outstanding balances are calculated.
- Due date
It is the date before which you need to pay your outstanding balances in full to enjoy zero-interest payments.
- Cash advances
These are the amounts that you withdraw in the form of cash from ATMs. Withdrawing money using a credit card includes heavy charges and is recommended only during emergencies.
- Grace period/interest-free period
It is a period between your purchase date and the billing cycle in which you don’t pay any interest if you pay your outstanding amounts in full.
- Late payment fee
If you default on a credit card bill, you may have to pay a late payment fee along with the outstanding amount and interest.
Is a credit card suitable for you?
It depends on your financial requirements and planning whether to own a credit card. A credit card can benefit you if you can manage your expenses and have controlled shopping habits.
Banks offer numerous rewards, cashback, and credit card offers that may eventually prove beneficial to you. Also, if you pay the outstanding amounts in full within the due date, you enjoy zero interest and no liabilities on the lent amounts.
However, a credit card may get into debt if you have poor financial management. Hence, you must understand your requirements and spending habits before getting a credit card.