In modern life, the use of credit cards has become popular and convenient for many people. Credit cards are not only a payment tool but also bring many benefits and conveniences to users. So, what 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 in the form of a short-term loan. Unlike a debit card that is directly linked to a bank account, a credit card allows users to spend first and pay later, with a certain credit limit granted by the bank.
When you use your credit card to make a purchase or pay for a service, the corresponding amount is debited from your credit card account. The bank will pay this amount to the merchant and you will receive a monthly statement listing the transactions made, the amount owed and the payment due date. You can pay the entire amount owed or pay in monthly installments as agreed with the bank. If you do not pay on time, you will be charged interest and other fees.
Illustration: Forbes Advisor.
Benefits of credit cards
Credit cards allow you to pay easily and quickly at stores, supermarkets, restaurants and online services without having to carry cash. Credit cards also allow you to purchase expensive products and services and pay them off in monthly installments, helping you manage your finances better.
Banks often offer incentives, promotions and cashback programs when using credit cards for shopping, helping you save money. Credit cards are equipped with high security technologies, helping to protect your account information and transactions. In case the card is lost or stolen, you can immediately block the card to avoid fraudulent transactions.
Using credit cards properly and paying on time helps you build a good credit history, creating favorable conditions for large loans in the future such as home loans and car loans.
Notes when using credit cards
Although credit cards offer many benefits, if not used properly, you may encounter financial risks. Here are some notes when using credit cards:
Plan your spending wisely and only buy necessary products and services to avoid falling into debt.
Make sure to pay your debt in full and on time to avoid interest and additional fees.
Regularly check your monthly statement to promptly detect unusual or fraudulent transactions.
Keep a portion of your credit limit unused to avoid having your limit reduced by the bank or affecting your credit score.
Source: https://vtcnews.vn/credit-card-la-gi-ar906915.html
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