I am sure every person must have listened about Credit Card.
And also have little idea how it works, right?
In simple words,
Borrowing money as LOAN.
But have you guys wondered how they take their money back?
well I have thought about it quite a lot
So, let’s just try to understand some facts.
DEFINITION
The credit card also knows as plastic money.
As the name suggests it is a type of payment method in which card holder has an arrangement with card issuer that cardholder pays a merchant for goods and services and will return that amount to card issuer along with charges as agreed between two of them.
There are two ways of returning that amount
* Minimum Due Amount
* Total due amount
1. Minimum Due Amount:
The minimum amount one needs to pay so as to keep credit card active.
Generally, it is 5% of the total amount.
2. Total due amount:
In which one pays the total amount he/she used within the due day
Nowadays “minimum due amount” lures the customer most
But as we know that DEVIL IS ALWAYS IN THE DETAILS
If someone pays 5% of the total amount, his card may not get blocked but the company will consider rest of the amount as LOAN and will charge 30-40% interest compounded annually.
This can really take a big chunk of your income.
Using it wisely is the key to success.