credit card: what is credit card how credit card works and types of credit card.

cerdit card

what is credit card: when I first graduated from college, I get to know about credit card but don't know what credit card is? how credit card works? how to use it I know nothing but all the people around me using them fearlessly, so I started doing research and learning about them, it turns out credit cards aren’t so scary after all! And are actually super helpful if you know how to use them properly!

but while I was researching, I had to go through lots of different websites and platforms there isn't a single website where I could learn everything at once, so I decided to write this blog where you get to know everything from how to open a credit card to how to close credit card. let's learn what is credit card and how credit card works. 

 Before you get started on your credit card journey, you have to know that you must treat credit cards just like cash. If you aren’t careful, you can get yourself in trouble and possibly buried in debt.

so, at first let's learn what exactly is credit card.

what is credit card?

A credit card is a special kind of card that you can use to buy things. It is like a small plastic card that you carry in your wallet. When you use a credit card to make a purchase, the store or the person you are buying from lets you take the item right away, even if you don't have the money to pay for it at that moment. Instead, the credit card company pays for the item on your behalf. Later on, usually at the end of the month, the credit card company will send you a bill telling you how much money you owe them for the things you bought. You then have to pay the credit card company back for the things you bought. It's important to remember that you should only buy things with a credit card if you know you can pay the money back later. If you don't pay the credit card company back on time, they might charge you extra money called interest. So, it's important to use a credit card responsibly and only spend money that you know you can pay back.

now you get to know what is credit card so let's learn how credit card works.

How credit card works?

Here is how a credit card works in detail:

  1. You apply for a credit card and are approved for a credit limit.
  2. You make a purchase with your credit card.
  3. The merchant sends the transaction information to the credit card network.
  4. The credit card network sends the transaction information to your credit card issuer.
  5. Your credit card issuer verifies your information and approves or declines the transaction.
  6. If the transaction is approved, the merchant is paid and your credit card balance is increased by the amount of the purchase.
  7. You receive a monthly statement showing your purchases, payments, and balance.
  8. You make a payment on your credit card bill.
  9. The credit card issuer updates your credit report with your payment information.

By using your credit card responsibly, you can build your credit score and improve your financial health. However, if you use your credit card irresponsibly, you could end up in debt and damage your credit score.

let's learn what are the types of credit cards. 

Types of credit cards

There are many different types of credit cards available, each with its own set of benefits and drawbacks. Some of the most common types of credit cards include:

  • Rewards credit cards: offer points or miles that can be redeemed for travel, merchandise, or cash back.

  • Cash back credit cards: offer a percentage of your spending back in cash.

  • Travel credit cards: offer benefits such as travel insurance, airport lounge access, and points or miles that can be redeemed for travel.

  • Student credit cards: are designed for students with limited credit history. They typically offer lower interest rates and annual fees than other types of credit cards.

  • Secured credit cards: require a deposit, which is used as collateral in case you default on your payments. They can help you build your credit history.

  • Co-branded credit cards: are issued in partnership with a retailer or other company. They typically offer rewards or discounts at that company's stores or on their products or services.

  • Store credit cards: can only be used at a specific store or chain of stores. They often offer discounts or rewards on purchases made at that store

The best type of credit card for you will depend on your individual needs and spending habits. If you travel frequently, a travel credit card may be a good option. If you want to earn cash back on your purchases, a cash back credit card may be a better choice. And if you're a student, a student credit card can help you build your credit history.

Here are some additional terms that you may hear when it comes to credit cards:

  • Annual fee: A fee that is charged by the credit card company each year.

  • Grace period: The period of time after your billing cycle ends during which you can pay your bill without incurring interest.

  • Late fee: A fee that is charged by the credit card company if you miss a payment.
  • Minimum payment: The smallest amount that you can pay on your credit card bill each month without incurring late fees or other penalties.
  • Overdraft protection: A service that allows you to use your credit card to cover purchases even if you do not have enough money in your checking account.
  • Rewards program: A program offered by some credit card companies that allows you to earn points, miles, or other rewards for using your card. 
now you know what is credit card, how credit cards works and types of credit cards.

In conclusion, credit cards have become an integral part of our modern financial landscape. They offer convenience and flexibility, allowing us to make purchases in-store and online without the need for cash. Understanding how credit cards work is essential to use them responsibly and avoid unnecessary debt.

We have learned what is credit card that a credit card is essentially a borrowing tool, where a credit card company pays for our purchases and expects us to pay them back. It's important to use credit cards responsibly by only spending within our means and paying the bill on time to avoid interest charges.

Moreover, we have explored the different types of credit cards available. here we learned types of credit card From basic cards with no annual fees to premium cards with exclusive benefits, there is a wide range of options to suit individual needs and preferences. Whether it's a rewards card, a cashback card, or a secured card to build credit, choosing the right type of credit card can enhance our financial management.

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