Most of us own a credit card and even if we personally do not own a credit card, we must have used a credit card at some point of time. But many among us do not know the basic working of a credit card. So as to help out everyone who may be interested to know a bit in detail on how credit card works and other basic information on credit cards, today we present you an article with the complete basic information on credit card.
How Credit Card Works?
As the name suggests, a credit card is a card issued by a bank which lets you spend money without actually having the equivalent amount deposited into the account, or in other terms, you are spending money by borrowing the amount as credit from the bank whose credit card you are using. There are several types of credit card such as cash back credit card, instant approval credit card, travel credit card & balance transfer credit card.
A credit card always has a limit, which is always set after checking out the financial standard of the customer like their monthly salary. Only a portion of this credit limit can be taken out as solid cash (the portion varies between banks) and the rest of the credit can be used for transaction by making use of the credit card.
Now, if the credit borrowed from the bank is deposited to the bank account within a month, then no interest has to be paid. However, in case you fail, you will be charged with an interest amount to compensate the amount you took as credit from the bank. People with bad credit, fair credit, no credit can apply for loan.
Best Credit Card Companies:
Even though credit cards are issued by banks, the technologies for the credit cards are issued by a variety of companies like Visa and MasterCard. While opting to avail a credit card from banks, people often choose to go with Visa and MasterCard credit cards as cards from both these companies are too common out there and these credit cards can be used for transactions pretty much anywhere around the globe.
The Visa Card Company has over 323 million active cardholders out there followed by the MasterCard Company with over 191 million actively issued cardholders around the globe. Other popular card companies include American Express, Citibank, Discover, Chase and Capital One.
How Credit Card Details are generated?
To create a personal credit card and to get your own credit card details, you will need to contact your bank expressing your desire to avail their credit card service. The bank will then analyze your bank account activity thus examining how active your bank account is, so as to verify whether you will be able to actively pay back the amount you take as credit from the bank.
The bank will also take a look into your monthly salary statement before setting up a credit limit on your credit card so that the bank can make sure that you are not allotted with a credit limit higher than your worth. Later they will provide you with a credit card that is issued by the card company whose technology your bank makes use of, or else, some bank also provides credit card owners the option to choose the company whose credit card they would like to take.
I hope you found this article to be completely informative. In case it help you to gain some basic information on credit cards and how credit card works, please do share the article with your friends.