Credit Card: Its Types

It is sometimes unsafe to move about with a huge amount of money. For this reason the debit cards and credit cards came into picture. Debit cards have certain disadvantages like the cardholder cannot buy a product or service when there is not enough balance in his account. Credit card removes this disadvantage or debit cards. Credit cards can be used anytime and anywhere to avail product and services. This is a more reliable form of payment.

Before a credit card came into action for making payments, In 1887 Edward Bellamy wrote a book named ‘Looking backward’ that was published the next year that became the best seller for that year.

Credit card can be differentiated on the basis of payment method as credit card, charge card and debit card.

Credit Card: This is a card that could be used to buy a service or product even if you don’t have the total sum needed to buy the product. This is a type of loan, which the borrower has to pay by the end of the month. This type of cards are useful in emergency situation when you don’t have the enough account balance to buy a product or service which is very important for you.

The lender of the card charges a fee and an interest to give you this facility. If you fail to pay the total bill of one month then the bill will carry on to the next month and you will be charged a high interest on the balance amount. So it is always advised to pay off the bills in time and never spend more than you can afford to pay.

The main feature of credit card was the limit that was given to all the members depending on the type of card (gold, regular or classic). A minimum amount has to be paid each month every month. Any delay in payments would subject you to the risk of paying huge interest rate over the minimum payment.

Charge Card: These types of cards can also be used for payments of the product or services you purchase but in this you have to pay the whole bill by the end of the month or in the following month with or without a delay fine.

These don’t have the provision of usage limit. The payment must be full on all the transactions and any failure to this will make you pay an additional cost.

Debit Cards: These types of cards are same as paying bills in cash, but the difference is that when you pay cash you have to bring the cash to the merchant and when you have a debit card the amount is deducted directly from your account and the merchant’s account is credited by that amount.

A debit cardholder can only possess the debit card of the bank where he has the account. When he/she pays off a bill using a debit card it is necessary that he have enough balance in his/her account so that he can clear off the bills. The bank charges some amount from the account holder to make this transaction possible.

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