How Do Credit Cards Work?

In recent times, the presence of e-commerce has grown manifold and more and more consumers are choosing to make even the most routine of purchases online. In line with the trend of increasing online purchases, payment modes have also evolved significantly.

New modes of payment have emerged and the ones existing from earlier have evolved to keep pace with customers’ new requirements. Credit cards have been one of the best payment methods available for years now and with the advent of digitalisation and e-commerce, credit cards have evolved to offer exceptional payment support in this new era too.

How Credit Cards Work
Right from the time of your credit card application status to the time you use it to make payments online, the smoothness of operations will be ensured by your credit card. As soon as you offer your credit card details in order to make a payment, they are sent to the merchant’s bank upon which authentication has to come from the credit card network for the payment to be processed.

The issuer of the card is required to verify the information shared and then either authorize or decline the payment. Once the transaction has been approved, the merchant receives his payment and the equivalent amount is deducted from your credit limit. Credit cards usually operate with a  billing cycle, wherein at regular frequencies, usually on a monthly basis, you will receive a statement from the card issuer regarding your expenses, your balance and the minimum payment due on the card.

Usually the statement mentions a grace period, by which time if you make the payment due, credit card interest rates will not be levied. However, carrying over the balance for months on end and failing to make due payments can result in high credit card interest rates being charged.

If you are carrying an annual balance, it will be reflected in an annual percentage rate or APR. This figure comprises your credit card interest rate along with any other charges, such as annual fees if applicable. While most credit cards have variable APRs, there are laws in place to restrict card issuers from increasing the APR too much.

Compare Credit Cards

While choosing your credit card, it is important to compare all the credit cards on offer. It is also necessary to first assess your own needs and requirements from the credit card before you make the purchase. Different cards are issued to different customer segments and it is necessary to browse through the credit card options before you take a call on which one you want. When choosing your credit card, don’t forget to do the following.

  1. Assess the different APRs that card issuers offer on purchases made
  2. The APR offered on cash advances and balance transfers
  3. Credit card fees charged annually
  4. Reward programmes offered
  5. Terms on introductory bonus offer

Choosing a credit card can look like a difficult task but Finserv MARKETS makes it easier for you. Credit cards, available on Finserv MARKETS, let you avail a personal loan against your credit card which you can then repay in EMIs. These credit cards enable you to withdraw cash without paying interest on it and you can also repay the amounts spent on purchases with easy EMIs.