The modern banking sector provides a huge number of services that are designed to help a person, but also any financial institution is interested in profit. Credit cards are one of the popular bank products. Before you issue any of them, you need to study all the advantages and disadvantages, since a credit card can be a useful purchase, or an additional problem.
Financial institutions issue credit cards that differ in terms of service provision and various bonus programs.
The advantages of credit cards include the following.
1. Lending limit. Banks approach each client individually and set the lending threshold, which most often depends on the client’s income and credit history. It can change depending on how the client returns the funds spent.
2. Grace period for using funds. This is the period during which you can use the funds without accruing interest, and after this period you will have to pay for the use of the loan funds.
3. Convenience. The purchase can not be postponed until a certain time, but purchased immediately; payment by card saves time as opposed to cash; online shopping; It is also convenient and profitable to use a credit card abroad, since money is automatically converted at a favorable rate.
4. Renewability. When depositing his own funds and replenishing the card, the client can again use the entire amount. In case of delay, you will need to pay a fine, and the bank will re-establish the limit of available funds.
5. Cash withdrawals. Most banks open the possibility of withdrawing cash for a fee. Each bank forms its own rules for this option.
6. Bonus programs. Almost every bank allows you to receive bonuses when paying with a card, these can be certain points or funds that are returned to the account.
Before you start using a credit card, you need to consider all the disadvantages. These include:
1. High interest and additional fees. The interest rate on a credit card is higher than on a consumer loan and averages 25-30%. In addition, banks set various fines and pennies, these can be penalties for late payments, service charges, cash withdrawals, and more.
2. Change in credit history. This disadvantage is especially felt if you want to get a large loan, since delays and fines on the card can greatly spoil the credit history, and as a result, the bank will refuse a loan.
3. Confusing terms. It is easiest to use the card during the grace period, but there are always various small nuances that are worth exploring.
A credit card is a very convenient banking product. If you know and fulfill all the conditions, you can use the card and not pay interest, but at the same time receive certain bonuses. However, you should always remember that frivolous use of a credit card can affect your credit reputation.