A credit card allows you to borrow money from your bank to make your purchases, whether you’re buying a burger or a round-trip ticket to France. As long as you pay back the money you borrowed within the “grace period” of 25-30 days, you don’t have to pay extra. If you don’t pay it back in that time period, you’ll have to pay interest — a percentage of the money you owe the bank — on top of what you borrowed.
Choosing a credit card
When you’re deciding which credit card to get, ask yourself one question: Will I be paying interest on my debts?
If you pay your credit card balance in full and on time each month, then you won’t be charged interest. In that case, it’s worth it to get a credit card with rewards. These cards give you points, cash or airline miles every time you use them. However, rewards cards have higher interest rates — high enough to wipe out the value of the rewards you earn. That brings us to what to do if you do carry a balance (in other words, you don’t pay off your debt every month). You’ll want to minimize your interest payments, so you should pick a credit card that has a low interest rate.
Your credit card is issued by a bank, like Hdfc Bank Or any other. The bank determines your interest rate, fees and rewards, so it’s important to find a bank that offers a card you like. It’s processed on a network, like Visa or MasterCard. The network doesn’t really affect the card, except for giving you random perks like travel accident insurance. Generally, the network isn’t as important as the bank.
Interest payments and fees
Credit card companies make money in three ways:
Interchange fees, or fees charged to the merchant every time you use your credit card
Interest payments, from when you don’t pay off your debt in full
Fees, like late payment or annual fees
You don’t have to worry about that first one. Interchange fees are a problem for merchants. Instead, concern yourself with interest payments and fees.