Ease and technology-driven payment method have broadened the way of several new ways of paying money. A credit card is one of them. Apart from providing ample benefits, it offers a cashless purchasing facility. It serves such a cashless benefit which even debit card can’t provide. While many people became wary of applying for doorstep loans like a provident loan, a credit card can easily solve the problem.
However, a credit card is also associated with financial risk. That is why before applying for a credit card, one should know about it.
What is a credit card?
Banks and even non-banking financial intermediaries offer a credit card to individuals so that they can go cashless during shopping. The most attractive factor about credit card is it does not debit invoice amount from the bank account. Moreover, instead of a one-time deduction, it offers the facility of monthly repayment of the entire invoice amount with instalments.
To earn revenue, a credit card company may be banks or other financial intermediaries they ask for an extra rate of interest on the invoice amount. Usually, the rate of interest varies from bank to bank. Initially, the credit card holder is provided with a credit limit within which the invoice amount should be limited.
Timely repayment of invoice amount can improve credit score, which helps to borrow money when needed.
What are several types of credit cards?
Whenever you check in any of the credit card company website, it can be visible to you there are different types of credit cards. So, if you cannot recognise which one will be suitable for you, then we are here to solve your problem. This verity is made to fulfil different types of need.
· Shopping credit card –
It has been observed that many people opt for shopping credit cards than others. Due to ease of payment after shopping it earned much popularity. It is an interest-free credit card that also offers the comfort of instalment payment.
Some credit card company offers lifelong interest-free payment while others keep the discount for only first-time users. However, the main benefit of using this type of credit card is a holder needs not to pay an extra amount for the entire repayment period. Even a shopping credit card user can extend the repayment tenure up to 30 months.
It would be a great idea to buy household things with this type of credit card because of its no interest facility and lengthy tenure.
· Debt consolidation credit card –
It is not uncommon that often people opt for doorstep loans. Here we cite an example of 4 unemployed people who opted for that loan, and due to a short repayment period, they are unable to repay the whole outstanding amount. However, to avoid the tag of the defaulter and amend the credit score, they applied for another loan through a credit card.
By applying this type of debt consolidation credit card, they can easily arrange for the fund to repay the outstanding amount. However, this type of card can also be used instead of your existing card. Whatever the number, one can constantly shift his current exceptional amount to a new debt consolidated card.
This card initially offers the benefit of interest-free repayment, so you can quickly minimise the borrowed amount with no added extra charge. Generally, this type of card provides the facility of balance transfer and adds new credit limits.
· Liquidity credit card –
This card type will always add an extra benefit to mitigate fund issue because of its all 24*7 liquidity facility. Moreover, with the help of this card, a person can quickly repay if he has taken any overdraft against his savings or current bank account. For this reason, it has earned immense popularity in the UK.
Even inside the ATM, one can take out cash by punching it. Although this card is associated with interest, you can get the discount of interest-free repayment initially. But be aware of the interest-free exhaustion period.
· Rewards point credit card –
There is a type of credit card which is attractive due to its enchanting rewards at every swipe. Who does not love to get a gift? By keeping it in mind, finance experts evolved this type of credit card. It is not an interest-free card, and with each swipe, a user can earn attractive rewards like cashback, coupons, discounts over interest for a particular purchase, and even points.
The chance of winning such gifts enhances its acceptability to ordinary people, and quick redemption of earned credit point helps its users mitigate emergency requirement of fund. However, if you find the best deal among all these realities, it can be the best choice. Every repayment improves credit score faster than others and even resists people from paying extra by minimising the interest fee.
· Credit score building credit card –
Every credit card can help a user to enhance his credit score. The only criteria to be fulfilled to improve credit score is regular repayment. Timely payments of dues can help a lot reduce negative credit score and enhances the possibilities of a good number. However, many people never used any credit card before, and for this reason, the credit score is not above the average.
The experts originate unique credit score building cards with a low rate of interest to solve the problem. Generally, people who apply for this credit card do not borrow massive amounts. However, the credit limit is also minimum for first-time users as they have no previous loan repayment history. Timely repayment helps them to pull up the credit score and make them eligible for borrowing loan.