A credit card is a card that allows a borrower to borrow money from a bank with a credit line to make payments. As long as the credit card holder pays for the specified period (usually 45 days), no additional charges will be charged to the card. If after this time, the bank will calculate interest based on the amount of credit card holders have “temporarily borrow” the bank.
The benefits and disadvantages of credit cards
|You can easily carry out great value shopping and pay off small loans||Be indebted if you are not careful with spending|
|Credit card statements make it easier for you to draft budgets||Convenience of credit cards can cause cardholders to overuse|
|Safe and convenient when you do not need cash||Interest rates can make small debt packages grow larger over time|
|Credit score building, very useful when you make loan transactions with banks later||Many risks arise when disclosing personal information on the card|
Things to consider when opening a credit card
Before opening any kind of card, you should answer the following questions:
- How do you plan to use it?
- Will you use the card in all payment transactions? Or use only when urgent?
If you use a credit card to pay for all purchases, you should look for a card with a large credit line and many offers. In case you only use the card during an emergency, a basic rate card with low interest rates and charges will fit your needs.
Interest rates on credit cards can be fixed or floated according to the market, depending on the regulations of the card issuing bank. The interest rates of each bank are different. Payment by credit card will be charged after 30-45 days depending on each bank.
Charges and penalties
Nowadays, credit card users pay various fees in accordance with the regulations of banks and financial institutions. So, before choosing to open a credit card, you need to consider the fees of many banks to choose the card with a reasonable fee, affordability.
- Card issuance fee
- Annual fees
- Cash withdrawal
- Late payment fee
- Excess credit charge
- Currency conversion fee
Special offers for cardholders
Most credit cards now come with attractive privileges coming from affiliated brands with card issuing banks. When making a purchase or using the service, cardholders may be entitled to special promotions. Banks will have different incentive programs. So, you should choose credit cards that have flexible offers that are really useful to you.
Card issuance process
– Customers who wish to open a credit card will come to the bank to fill in the card application form and provide proof of income in accordance with the bank regulations.
– When the bank receives the complete dossier, it will evaluate and check the accuracy of the documents provided by the customer as well as the repayment capacity of the customer.
– If the customer profile satisfies the conditions, the bank will proceed to classify the credit limit.
– Before transferring the card, the bank will enter the customer information into the management system, encrypt the information on the card, and require the cardholder to sign and sign the form at the bank.
– After receiving the card, please keep personal information on card and CSC (Card Security Code). If there is a risk arising from customers disclosing information, the customer is fully responsible.
Normally, the time from the time the customer applies for card issuance to the time of receiving the card is 5-7 working days.
Credit card payment date
The credit card holder has 45 days interest free, no interest charged (depending on the bank). During this time, if you do not pay your outstanding balance on the credit card, the bank will start calculating the interest based on the outstanding balance at the end of the period.
On the monthly statement date, the bank will send you a statement of transactions last month with the email address you registered with the bank. Then, you have 15 more days to pay off the outstanding balance.
Example: You get a credit card statement this month on September 28th, with payment due date October 13th. All transactions arising after the statement date of the previous period (ie August 28) will be exempted from interest and included in the statement of the next period (September 28). Your 45-day exemption period will include 1 month and 15-day interest-free period. You need to pay all outstanding balance on statement before 13/10. After this time, outstanding loans on the statement made on September 28 will start to be charged interest. Also, to take advantage of the 45-day interest-free period for the next period, you should make the transaction on September 29th.
How to pay your credit card balance
By the date of payment, the credit card holder can pay all outstanding balance at the end of the term or minimum payment in the following forms:
Automatic payment: You can register with your bank for automatic deduction from your payment account to pay off your credit card balance (minimum or full debit). This way of payment is simple, fast, ensure the cardholder timely repayment. However, you need to maintain the balance in your payment account equal to or greater than the outstanding balance in your statement before maturity.
Payment of cash: cardholders can go to the counter of the card issuing bank to make cash payment for credit card debt. In addition, some of the bank’s ATMs have added direct cash payment functions, cardholders can pay their credit card debt via ATM.
Bank transfer: The cardholder can transfer money via Internet Banking service or select the function of paying credit card debt at ATM (depending on the ATM of the issuing bank that supports this function).
Payments from another bank: You can transfer funds from another bank to the credit card bank account to issue credit cards.
Note: When using the outstanding credit balance by ATM card (cash or transfer), if payment is made before 17:00 on working days, the payment will be recorded on that day. If payment is made after 17:00 on working days or on holidays, the payment of outstanding loans will be recorded by the bank on the next working day.
The principles to remember when using credit cards
Secure card information
When making an online payment, simply enter the information printed on the card with the CSC code number – the card security code is already able to make the payment. If the cardholder shares this confidential information with many people, the risk of personal information theft.
Credit cards do not require entering a PIN when making transactions at checkout counters. This makes it easy for the cardholder but is very risky if the card is lost. So, when you lose your credit card, you should call the bank asking for a card lock, avoiding unfortunate risks.
Use a credit card ie take a loan
Unlike Debit or ATM, the amount of money you use to pay is essentially the amount you are borrowing from the bank at 0% interest (within 45 days of interest-free). By the time of payment, you still have to pay back the full amount of the loan. If the cardholder can not pay all the outstanding balance to the bank on the day of payment, the bank will start calculating a relatively high interest rate (about 26% to 31%) based on current credit card balance. So, when making credit card transactions, you should consider your ability to repay at the end of the month, avoiding the risk of falling into debt pile up.
Pay attention when giving the card to the paying staff
Many credit cardholders, when shopping for food and drink at a restaurant, often trade their cards to cashiers to make payments and never look at the card. This habit can cause the cardholder to risk theft of personal information is quite high if the employee capture the security information printed on the card.
So, when giving your card to a waiter or cashier, you should pay close attention to the process of stamping the card and carefully checking the information printed on the slip.
Pay attention to the payment time
Depending on the credibility of the customer, the bank will issue a different credit limit. Credit card holders will receive a 45-day “interest-free” loan. During this time, if the cardholder is late or paying only the minimum amount, the bank will start to calculate the interest on the total outstanding balance in the statement as well as the fee for deferred payment. Therefore, credit card holders should have a plan to control their spending, ability to pay on time to enjoy the interest rate incentives, limit the fees incurred.
Do not use credit cards like ATM cards
Banks do not encourage the use of credit cards to withdraw cash such as ATM cards. So, if you use a credit card to withdraw cash, you will be charged a premium (usually 1% – 4% of the amount withdrawn). So, just withdraw your cash by credit card in case of really needed.
If used smartly and properly, credit cards are a very useful means of payment, preventing many risks when paying by cash. Conversely, if you do not have control, your credit card holder will easily fall into the debt loop. So, when using credit cards, cardholders need to master the key principles as well as balance the demand for loans with repayment ability.