Characteristics of Credit Card.In modem banking, banks have started modem services to facilitate their customers. Different banks issue different kinds of credit cards to their customers. These cards of banks are useful not only inside the country but also out side the country for payment. These cards are of such material and size that they can be put in pocket easily.
DEFINITION:
“A credit card is part of system of payments, issued to users of the system. It is a small plastic card entitling its holders to buy goods and services based on the holder’s promise to pay for these goods and services. ”
Characteristics of Credit Card In Business And Life
Following are the characteristics of credit card.
- Magnetic Strip:
Magnetic lining is drawn on credit cards, which contains specific number or secret code. It is also called DATA STRIP.
- Electronic Chip:
It is a data storage device, which is built in the card to record particular data like reward points and redeemable points.
- Specific Number:
Every card has specified number, which is usually of 12 to 16 digits.
- Picture:
Bank also issues such credit cards, which possess the photograph of the cardholder.
- Signature:
Credit card also contains the signature of holder.
- Name:
The name of the holder is written on the card.
- Non-Transferable:
Credit card is non-transferable and only card owner can use it.
- Name of Bank:
Every credit card has the name of issuing bank.
- Floor Limit:
Bank fixes the limit of credit card according to the financial position of the customer. This limit is called floor limit and a customer cannot buy more than the fixed amount of this card.
- Payment to Bank:
Every cardholder pays minimum fixed amount from monthly bills and on balance interest is charged at the rate varies from 2.25% to 3%.
- Renewal:
Credit card is issued for a year and can be renewed after a year.
- Scope:
This card is useful for both local and foreign payments.
- Cancellation:
If cardholder does not make the payment to bank on due date then firstly his fixed limit of amount is reduced and the card is cancelled afterwards.
The credit cards issued by commercial bank provide following benefits.
- Easy Payment:
The credit cardholder can make immediate payment of goods purchased without using cash (paper money).
- Facility in Payment:
Bank allows a specified time to credit cardholder for the payment of goods purchased. This allowed period might extend to about fifty days.
- International Payment:
The credit cards are not only used for domestic payments but also used to buy goods and services in foreign countries.
- Loan Facility:
The credit cardholder can obtain cash loan from banks in the hour of need through credit card up to a certain limit.
- No Need to Carry Cash:
If a person is carrying cash then there may be a chance of its theft or loss. Thus, the person who transacts through credit card gets himself free from the protection of money (cash).
- Proof of Payment:
The person (buyer) who makes payment by credit card gets the proof of his payment because the transactions made through credit card are clearly written on the bill of credit card.
- Growth of Banking System:
The use of credit card makes the transactions easy. So, the people are getting maximum benefits due to its use and banking sector is growing.
Characteristics of Credit Card;Final Recommendation
Credit cards are a popular form of payment that allow individuals to borrow money from a financial institution or credit card issuer in order to make purchases. Some of the key characteristics of credit cards include:
- Credit Limit: A credit card has a predefined credit limit, which is the maximum amount of money that a cardholder can borrow using the credit card. This limit is determined by the creditworthiness of the cardholder and their ability to repay the debt.
- Interest Rates: Credit cards charge interest on the amount borrowed if it is not paid back within a certain period of time. The interest rates can vary depending on the credit card issuer, the creditworthiness of the cardholder, and the type of credit card.
- Fees: Credit cards may come with various fees, such as annual fees, late payment fees, over-limit fees, cash advance fees, balance transfer fees, foreign transaction fees, and more.
- Rewards and Benefits: Many credit cards offer rewards and benefits to their cardholders, such as cashback, rewards points, travel rewards, discounts, and other perks. These rewards and benefits can vary depending on the credit card issuer and the type of credit card.
- Grace Period: Most credit cards have a grace period, which is the amount of time between the billing date and the due date during which the cardholder can pay off the balance without incurring interest charges.
- Credit Score: Credit cards can have a significant impact on a cardholder’s credit score, which is a numerical representation of their creditworthiness. Making timely payments and keeping balances low can improve a credit score, while late payments and high balances can lower it.
Overall, credit cards offer convenience and flexibility in making purchases, but they also require responsible management to avoid debt and maintain good credit.
