Learn How Credit Cards Work

Nowadays debit and credit cards have become very popular in the field of cashless digital banking. Almost all banks now offer debit cards with accounts. However, relatively few people use credit cards in our country. As a result, there are several misconceptions about credit cards. Many people have no idea how credit cards work. However, in the banking of the digital age, it is important to have an understanding of credit cards. Credit cards can help you save money as well as help you make big and expensive purchases.

From this post you will know how credit card works. Having a proper understanding of credit cards is the only way you can understand whether credit cards will bring you good benefits. Because credit cards can sometimes become a burden due to misuse. So learn more about credit cards from this post.

What is a Credit Card?

A credit card is a plastic card that is usually issued to you by a bank to pay various purchases, bills, etc. The simple meaning of credit card is that the bank is giving you a temporary loan or loan through the credit card. You can use the credit card to make purchases from the money given by the bank and later repay this money to the bank according to your convenience.

Credit cards are usually given based on one's occupation and monthly income. Banks give this loan only after confirming your income directly. In the country, credit card can be taken only if the salary is 30 thousand rupees. Besides, many banks also offer credit cards through FDR or fixed deposits. How much you can spend on a credit card is also determined based on your income. In the country, banks generally give a credit limit of up to 4 times of monthly salary. Credit Limit Your spending limit with a credit card. This is discussed in detail in the next part of the post.

How do Credit Cards Work?

Although a credit card looks like a regular debit card, the credit on the credit card is not your own money or money. It is a loan from the bank. This is known as credit. Bank gives you loan based on your monthly income. That means you need a regular income or permanent job to get a credit card. At present, the banks of the country give credit limits up to four times the salary.

A credit limit refers to the amount you can spend on a credit card each month. If your salary is 20 thousand taka, then you can get a credit card with 4 times that i.e. 80 thousand taka credit limit from your bank. In this case, you have to withdraw your salary regularly to your bank account every month. Only then will the bank be interested in giving you a credit card.

Credit cards can be used to make purchases online or at various stores. Besides, you can avail EMI or installment facility by using credit card for big or expensive purchases. When you use a credit card to make a purchase, your credit card information is passed on to the person buying the product. The seller's bank then requests permission to use this amount from your bank through the credit card network. If everything is in order and within your credit limit, your bank then transfers this amount to the seller's bank.

The biggest advantage of credit cards is that you are not using your own money. You are completely using your bank money for purchases. The bank will then send you the credit card bill at the end of each month. This bill tells you how much bill you have to pay and the last time to pay this bill.

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If you don't pay within this period, the bank takes extra profit or charges from you. So it is important to pay the credit card dues on time. In this way, credit cards allow you to make purchases even if you don't have the money. Later, when you receive the money, you have to pay it back at the specified time. And that's how credit cards work.

However, it is important to take some precautions regarding credit cards. Never buy anything with a credit card that you cannot pay off at the end of the month. This will increase the amount owed on the credit card and your charges will also increase. As a result, credit cards can become a burden for you. Using up the entire credit limit can make it difficult for you to pay it off.

Interest free EMI service can be availed on product purchases. In this, you will get the facility of purchasing expensive items in installments within the credit limit without any additional charges. As a result, you can make small payments in full each month. This installment amount will be added to your credit card bill.

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So you should take credit card only if your income is sufficient and stable. Because credit card bills must be paid on time. Otherwise, credit cards can become your headache. It is possible to take full advantage of credit card only if you are careful in using credit card.