How do credit cards work?
A credit card is a plastic or metal card that is issued to you by a bank or a financial institution with a pre-set credit limit allocated to you for use.
Your card will have a unique long card, which can be 15–16 digits long with your name.
Apart from this long number, you will see card security codes and your card expiration date on your Credit card, which you will need to use while making any purchase.
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How do I use my credit card to make a purchase at shop?
To make a purchase, you need to swipe your card on a card machine and authorize the transaction with a credit card PIN, or if you have a card with a “contactless transaction” facility, you can also use the contactless transaction feature to make transaction without using your credit card PIN, Contactless can be used only upto a certain transaction limit you can always check with your card provider.
How do I use my credit card to make a purchase on an online website or mobile app?
Your online payment page will ask for your credit card number, your full name on card, card expiration date, and security digit mentioned on your card which can be a 3-4 digit code printed on your card, once you have entered these details, you will need to click on proceed and then you need to authorize a transaction which can be done by a one time passcode sent to your Contat number or email and yes that’s all, Congratulations! you have successfully completed your first online credit card purchase.
How do I know if my credit card has Contactless feature?
If your credit card has a contactless payment feature, you will see an NFC symbol on your card,which resembles a lot with WiFi symbol you see on your Mobile devices when a wifi is connected.
How do I pay my credit card bill?
You can log in to your Credit Card Account through an App or Online Account through a browser to pay your credit card bill each month.
How do I know my due balance each month?
Every month you will receive a monthly statement on your Credit card account that shows your due balance, This can be sent to you via post or online each month, You can check your credit card account or contact our card provider to know how you will be receiving your monthly statements.
What is a credit card statement and how to read your credit card statements?
Your credit card statement is a few pages long detailed report about your credit card usage for last billing cycle.
Your credit card statement includes below details:
- Your full name
- Your billing address
- Card issuer address
- Card issuer contact details
- Total of all purchases on last billing cycle
- Total of all the refunds on last billing cycle
- Statement Balance due- This balance is how much you need to pay to clear your full statement balance.
- Minimum Balance due- This is the balance that you can pay to keep your account up-to-date and may trigger interest charges if applicable as per your card membership agreement.
- Payment due date- last date to clear your due balance to keep our account in good standing.
- Any charges that are applied to your card by your cardissuer, – like card membership fee, late payment charges, interest charges , forex fee , card withdrawal fee or any other fee wherever applicable as per your card membership agreement
- All the transactions with amount, date and merchant names
- All cash withdrawal transactions (if any)
- All transitions for Supplementary/additional cardholders on your account (if any).
- Earned rewards information if you earn rewards like points, cashback on your card purchases,.
- Your statement may include payment methods, details about your card terms and conditions related to fees and charges, rewards, etc this vary with card issuers.
How do I read card statement?
You should always check your balance due and payment due date carefully each month and go through all the transactions to know that you recognize all the transactions on your account that you are about to pay.
Carefully check if your statement includes any fees or charges from your card issuer.
If all good you can proceed with paying your credit card balance according to your payment due date.
What is a billing cycle?
Your credit card statement is closed once a month and includes all the details about your credit card usage for the last month, and that’s your billing cycle. Further, they will provide you with an interest free period before you pay your credit card bill.
For example, your credit card statement closes on 1st of each month, so the statement that will close on May 1 will include the card usage details for billing period: 2 Apr – 1 May, This is a billing cycle.
After you have your total balance due on May 1, you will 14-25 interest free days more to make payment.
What is payment due date?
Payment due date is something that you will find on your monthly Credit card statement, which will be the last date to pay your balance in interest free period.
What is interest charge and interest free period?
Interest charge is an amount charged by your card issuer to you on balance you owe on your card even after the payment due date.
Interest free period is the number of days you get from the date you make a purchase on your credit card to the payment due date, During this period, your bank does not charge any interest on your account for balance owed.
For example, if you purchase something for £100 on April 5, your statement will close on May 1, and your payment due date is May 14, then your bank will not charge any interest for the period from April 5 to May 1 this is known as interest free period.
What if I miss the payment due date?
If you miss the payment due date, your card issuer may charge Late payment fee and interest charges on your account.
If you earn rewards on your card purchases, they may be forfeited if you miss a payment. You can check your card membership agreement for fee details or rules for rewards you earn on your credit card.
A missed payment marker can also reflect on your credit report.
How do I withdraw cash from credit card?
You must be looking at a section on your credit card account which shows “Cash Limit.”
This cash limit is a percentage of your total preset spending limit on your credit card, Your card provider decides this percentage for you and allows you to withdraw cash through your credit card.
Your card provider will give you a cash policy, so you will know how to withdraw cash from your credit card and what factors to keep in mind.
Your bank may charge you a fixed or a percentage of the total amount you choose to withdraw as a one time fee, and they can also apply an interest charge on this withdrawal from day 1, which means you may not get any interest free period on your cash withdrawal transactions.
This is because your bank provides this facility for emergency cases, In case you are traveling and have any cash problems, like your bank account getting blocked or your phone or debit card being stolen, and you are only left with a credit card, you can use your card to withdraw cash for your emergency requirements.
You can check your card membership agreement to know the fee details and rate of interest that your bank applies to your cash withdrawal transaction.
Let’s understand balance transfer now
Let’s say you have 1000GBP outstanding on your card A and you are looking to revolve this balance monthly by paying interest charge every month for 12 months, let’s say your card charges 30% APR (annual percentage rate)
You have another card B offering a 0 APR or a lower APR than Card A, in this case, you can transfer your outstanding 1000GBP from Card A to Card B if Card B offers this facility.
So, what you need to do is check Card B if they offer “Balance Transfer” Facility and put in your Card A details to make a payment from your Card A to Card B
This way, Card B will send 1000GBP to Card A, to pay off outstanding balance on Card A.
Now that 1000GBP will appear as outstanding on your Card B, you can choose to pay this balance over 12 months on a lesser or 0 interest rate.
You can check your card agreement to know what the rate of interest your card provider applied to balance transfer
