How does a credit card work?
How a credit card works are very simple. The bank will not begin to charge interest on the debt until the user stops using it or the credit card’s maturity is exceeded. Due to its very similar appearance and purpose, it is very often confused with a debit card, that is, the main payment card that is in our wallets.
Credit and debit cards are virtually identical in appearance
However, the difference in their number in our market is quite significant, the number of debit cards used is 4 times higher than the number of credit cards. The disproportion arises primarily due to a different mechanism of action, which also requires the use of a different method of withdrawing and rewarding the plastic. Credit cards are credit products, so the creditworthiness of a particular customer will be the deciding factor, among other things.
The credit card checker helps to check the validity and eligibility of a credit card before you make any transaction.
Undoubtedly, anyone who has used any kind of card payment can pay by credit card. With its help, you can easily pay in a stationary store by bank transfer with or without a PIN code within the permissible limit, as well as pay for purchases on the Internet. However, the obligations of the holder do not end there.
If in the case of “linking” plastic to a bank account, the amount is withdrawn from the account, then the credit card limit is used, which has nothing to do with our savings. So it will need to be repaid and the final cost of the loan also depends on how we do it.
The bank identification number is a unique combination of 9 digits in a specific order. There cannot be two identical BINs. Due to this, payments sent to a particular bank always reach their intended destination with the correct BIN.
A bincode performs numerous jobs, including Help to recognize the buyer by offering an extra sign. Affirm inline approval by requesting that the consumer enter their credit card number just like the kind of credit card they are utilizing. Guarantee consistency with send-out laws by recognizing the card-issuing country.
Credit card interest-free period
A special concept related to the operation of a credit card is the interest-free period – this is the period during which the bank that issued the card will not charge interest on the used debt limit. The interest-free period is usually 50-60 days. It consists of two parts:
Billing period: this is the time during which we can use the provided limit. It lasts a month, and its end is marked in the contract.
Debt maturity: at the end of the billing period, the bank sums up the funds used and gives us time to repay them. This will depend on the policy of the bank, but it is usually 20-30 days.
This means that when paying for purchases by card on the first day of the billing period, we have 30 days plus 20-30 days to return this amount, which was set by the bank in the offer.
During this time, the bank will not charge interest on the amount spent. This means that we can only pay off the card debt at the end of next month, and until then we can still use the free loan.
Credit card repayment
However, before the end of the interest-free period, the credit card must be redeemed to prevent the bank from charging interest. Thus, using the card will mean that the customer will only pay for using the card.
Paying by credit card is a very simple process. The card issuing bank provides the credit card number, or rather the account number, which is used to pay off the debt. The only thing the client needs to do is make a timely transfer of funds from the current and savings account to the credit card account.
However, be careful if you make payments on the last day of the interest-free period. The same rule applies here as in the case of a regular transfer – it cannot be delivered on the same day, and as a result, the bank will charge interest for each day of delay.
Repayment does not always mean the same thing
People with a credit card should know that the possibilities that plastic hides don’t end there. They do not have to pay the entire amount taken. Banks set a minimum amount, usually 5% of the amount owed on the card. The remaining amount can be divided into parts and paid off later.
However, it is worth remembering that in this case, you will have to consider the interest rate. In most proposals, it is equal to the maximum allowable rate, that is, four times the Lombard rate, currently 2.5%. Thus, credit cards are most profitable when we manage to pay off all the debt in the so-called “grace period”. Otherwise, it is no longer so profitable.
Credit card transfer and credit card cash withdrawal
The credit card is mainly used for payments at landline or online stores. You can also use it at an ATM or make a transfer. However, banks charge a substantial commission for such non-standard operations.
Although the basic use of the card is not expensive, any transactions involving converting the credit limit on the card account into cash require additional fees. The commission for withdrawing cash by credit card can be up to 10%.
cash withdrawal by credit card
Credit card withdrawal fees can be as high as 10%
The same goes for transfers from a credit card account – perhaps, but no less expensive. Credit card issuers often also offer to convert the available credit line into a cash loan. However, it should be remembered that interest is calculated from the moment of signing such an agreement, and not, as in the case of repayment of a credit card, only after the end of the interest-free period.
Credit card commission
However, the high fees for withdrawing cash from an ATM with a credit card or transferring from her account are not all. Most banks also stipulate that non-cash transactions alone do not bring interest.
Therefore, often the funds received in this way will cost much more, regardless of whether we managed to pay off the entire debt in an interest-free period or not. In order not to lose valuable savings, you should carefully read the terms of the contract.