What is a credit card?

In modern life, using credit cards has become common and convenient for many people. Credit cards are not only a payment tool but also offer many benefits and conveniences to users. So, what exactly is a credit card?

A credit card is a type of payment card issued by a bank or financial institution, allowing the cardholder to make purchases, pay for services, or withdraw cash as a short-term loan. Unlike debit cards, which are directly linked to a bank account, credit cards allow users to spend first and pay later, up to a certain credit limit granted by the bank.

When you use your credit card to make purchases or pay for services, the corresponding amount is debited from your credit card account. The bank will pay this amount to the seller, and you will receive a monthly statement listing the transactions made, the amount owed, and the payment due date. You can pay off the entire amount or make monthly installments as agreed with the bank. Failure to pay on time will result in interest and additional fees.

Benefits of credit cards

Credit cards allow you to pay easily and quickly at stores, supermarkets, restaurants, and online services without needing to carry cash. They also enable you to purchase expensive products and services and pay in monthly installments, helping you manage your finances better.

Banks frequently offer promotions, discounts, and cashback programs when using credit cards for shopping, helping you save money. Credit cards are equipped with advanced security technologies to protect your account information and transactions. In case your card is lost or stolen, you can immediately block it to prevent fraudulent transactions.

Using credit cards correctly and paying on time helps you build a good credit history, making it easier to obtain larger loans in the future, such as mortgages or car loans.

Things to keep in mind when using credit cards.

Although credit cards offer many benefits, improper use can lead to financial risks. Here are some things to keep in mind when using credit cards:

Create a sensible spending plan and only buy necessary products and services to avoid falling into debt.

Ensure you pay your debts in full and on time to avoid incurring interest and other fees.

Regularly check your monthly statements to promptly detect any unusual or fraudulent transactions.

Keep a portion of your credit limit unused to avoid having your limit reduced by the bank or negatively impacting your credit score.

Compiled by Cong Hieu

Source: https://vtcnews.vn/credit-card-la-gi-ar906915.html