Credit Cards Simplified!!

Introduction

Imagine having an a never-ending treasure with you. A type of device that would allow you to fulfil all of your materialistic wants with which you can buy things even if you don't have cash in hand! What a wonderful invention it would be right? What is I told you that such a device already exists and it is known as a credit card. A simple swipe or tap with this card can immediately help you acquire anything money can buy; be it gadgets, trendy clothes or sneakers.

Interesting Fact: Jonathan Werner , A Canadian investor and billionaire, once bought a $65m skyscraper with his credit card!!

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Credit Card in lament's language is a card which helps a consumer buy things instantly, the payment for which can be done later. When a Credit Card is swiped, the banks basically make payment on behalf of the credit card holder, who clears off his dues at month end. One can take more than a month to pay off their credit card dues as well, but in such a case, the banks would charge a high rate of interest.

What is a Credit Score ??

A credit score is a numerical representation of a person's worthiness. It ranges from around 300-900. A Higher credit score, 600+ indicates a lower credit risk and vice versa. A good credit score makes it easier to avail loans with favourable interest rate. It is calculated by keeping factors like payment history, credit utilisation, etc. in mind.

Disadvantages

Though Credit Cards can be extremely useful and convenient to use, they, like every other thing have their own set of disadvantages as well. Here are some downsides of using credit cards;

- Debt Accumulation: Accumulation of debt on one of the major downsides of owning a credit card. If the card holder fails to repay their credit card bills, they are charged with heavy interest rates which eventually leads them down a debt spiral.

- Over-spending: The easy availability of money provided by credit card can get to the best of us. It often leads to users purchasing expensive goods which they otherwise wouldn't have bought. This further leads to accumulation of unnecessary debt.

- Hidden Costs: There are several hidden costs that come with credit cards. Annual fees, interest charges, over limit fees, foreign transaction fees are just some of them. Card Holders must keep these hidden charges in mind before getting a credit card.

Conclusion

Though credit cards play a significant role in modern day finance and can be extremely useful in many situations, one must use them responsibly. Keeping control over one's purchasing, paying card bills on time and managing credit card debt effectively will help in avoiding the potential financial difficulties posed by credit cards.