What is a credit card? - Credit & Loan Options What is a credit card? - Credit & Loan Options

What is a credit card?

Credit Card:– You can use a your credit card to borrow money from the bank to make purchases and  payments. Its more secure to carry and use credit card than a wallet.

Your credit card is issued by a bank, such as FNB, Standard Bank and its the bank that determines your interest rate, fees and rewards, so it’s important to find a bank that offers a card you like.
Transactions are processed on a payment network, like Visa, Mastercard or American Express.
This network determines where the card is accepted. Some card perks — like rental car insurance or cell phone protection — may come courtesy of the payment network rather than the issuing bank.

Credit card companies make money in these ways:

  • Interest payments and fees
  • Transaction fees charged to the merchant every time you use your credit card.
  • Interest payments when you don’t pay off your debt in full.
  • Fees, like late payment or annual fees.
  • You don’t have to worry about that first one. Transaction fees are levied on merchants, not you.

Instead, concern yourself with interest payments and fees.Credit cards charge a number of fees, from an annual fee to cash advance fees to late payment fees.

Most cards won’t have an annual fee unless they offer big rewards or are designed for people with less-than-good credit, but make sure to make at least the minimum monthly payment on time, or you may be slapped with a late fee and a higher interest rate — and you might even see your credit score suffer, if you have a rewards credit card,

If you carry a balance, the interest on that balance will eat up any rewards you earn.
If you think there’s a chance you won’t pay off your balance every month, steer clear of rewards cards.