Must Know- 5 Credit Card Terms
The Recent demonetisation drive has accelerated the cashless transactions in India significantly. Urban youth prefer to use the plastic debit and credit cards over any other option available for cashless transactions. It is not surprising to find multiple credit cards in the wallets of the urban youth and everyone knows how to use them for digital transactions. The purpose of this article is to enlighten the reader about different credit card terms which the user is unaware of. Knowing these terms will help you know the terms and conditions of the credit card you are holding and help you to use it effectively to make a maximum benefit.
Credit card limit is the maximum amount you can use for your digital transactions during the billing cycle. Any amount spent beyond this specified limit is considered as overdraft and interest is charged on the same from day one. If you are prompt at repaying your bills on time, the lender may consider increasing your spending limit. On the contrary, if you have a history of late payments, there are chances that your credit limit may be reduced.
Cash advance is an option given to the user to withdraw cash from the ATM subjected to the credit limit. This should not be your option unless you have no other source to raise funds to address your emergencies. When you use cash advance option on a card, you are obliged to pay two types of fee like cash withdrawal fee and interest on the amount withdrawn from the day one of using it. These charges are very high vary for different credit cards.
Over limit fee
As said earlier, every credit card user will have a cap on the amount used in the billing cycle. If your transaction exceeds this limit, the banker will decline the transaction in most of the cases, still, charge you with the over limit fee which will adversely affect your credit report.
All credit card users must be aware of APR interest rate on their credit card. This is the interest rate charged on your outstanding balances when you don’t pay the bill completely on the due date. You should choose the credit card will lower interest rate to reduce your burden in the case of unforeseen circumstances. These interest rates are shown in the monthly format when it says it is 3%, APR refers to 36%.
In other terms, revolving credit is the credit limit available to you after each billing cycle depending on the payment made by you. If you have a credit limit of one lakh on the card and you have made a transaction of 20,000 for the month, making full payment on the due date will bring back your credit limit to one lakh again. If you have a made a partial payment of 10,000, your available credit limit for the next month is reduced to 90,000.