A credit card is basically a payment card which is used by the customers to pay off for the things they purchase even when they don’t have the cash with them. The banks and financial institutions provide credit cards with accounts providing a line of credit whose bill can be later settled on pre-decided terms of interest rates. The banks give this credit on the card holder’s promise to pay back. The banks generally charge interest rates on the amount of credit that they provide.
When you have a credit card you can pay for any product or service with that card. The credit card companies enter into agreements with merchants to accept their credit cards. The issuer of the card gives a credit card at the time of opening an account. Now when a purchase is made with the card, there is a clear understanding that the cardholder will pay the amount to the issuer. A card is swiped against and a receipt is signed by the customer in addition to the PIN (personal identification number, which the customer has to put in to make the payment. The merchants get to know whether that card is valid or not and whether funds can be withdrawn from the said account. If you have not already exceeded your credit limit, your card will have been considered to make the payment.
The cardholder is sent a bill every month, about the expenses which he has made on that credit card. There is certain minimum amount of the bill which must be paid by the due date. You may be charged late fees if you cross the due date. It is always advised to pay the entire amount of the bill at one go. Though the amount can be paid later, but then the interest for that rolled over credit will increase, and generally the interest rates for credit cards limits are much higher than other forms of debt. So, if you want a safe a secure credit history which can always be helpful in getting new credit cards and loans, pay your bills on time.
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