Hello readers, welcome to Techsesh Sagar and today we will discuss one of the most common and widely used forms of plastic money i.e. Credit cards. In today’s discussion we will discuss the meaning & history of a credit card, what are the requirements of getting a credit card and what are the pros and cons of using this type of currency system.
What are Credit Cards?
Credit card are the mode of payment in which the cardholder can pay for goods and services that he uses without the involvement of his/her own money or cash, and at the particular time interval the cardholder has to pay card issuer(generally the banks) the amount with some extra charges and if you are not able to pay that amount then you will be charged with high-interest rate which we will discuss in it’s pros and cons section. However let’s see the history of credit cards, the idea of credit card was initially started in 1920’s when CHARGA PLATES and AIR TRAVEL CARDS were used in the U.S , but no one was able to successfully collaborate with mainstream financial system as only a few merchants were accepting it, until 1950’s when BANK OF AMERICA launched their BANKAMERICA cards and it laid the foundation of CREDIT CARDS, and the main reason why it was successful was because their cards were accepted by a large number of merchants.
How can you get a credit card?
Every credit card is not the same they all have different limits, for example, some people have a credit card with which they can spend one lakh $ and some credit card holder can spend only up to ten thousand $, so who decides the limit or what are the criteria of getting a credit card. It basically depends upon two things i.e. Salary and CIBIL score.
So in this case when you will apply for credit card in your bank, at first they will check your salary as they want to be assured that you can return their money. If your salary is injustice with the limit of credit card you want then they may issue you your own credit card.
2. CIBIL score
CIBIL score is basically a three digit number that tells you credit history or in laymen language when you take any amount as a loan there will be a score given to you on how you repay that loan if you repay it on time you will get a good score and if you don’t then your score will go down. So when you apply for credit card bank will also check your CIBIL score which means that they are checking your credit history and if it’s good then congratulations you will definitely get your own credit card.
PROS of credit cards:
1.Record of transaction
It is one of the advantages of credit card as there will be a record of all transaction that is taking place with your credit and in case of fraud or any security breach that may happen in online transaction, you will have your transaction record and you can show & verify it with your bank and government authorities.
2. Safe and convenient
The credit card is one of the safest ways of payment. As in this modern world you make most of your payment online, so there is a possibility of online fraud or it may be possible you fall under the trap of hackers, in both case it is not your money, since it’s a credit so it is the money of your bank and your own money will be safe.
3. CIBIL score
Your CIBIL score increases as you repay your dues on time and this will help you when you will take loans from a bank, as they check your credit history when you apply for loans and if your credit history is good then you can get loans at low rates of interest.
CONS of credit cards:
1.Rates of interest
If you will not use your credit card smartly then it can be quite costly and inconvenient for you as if you will not pay your dues on right time, high-interest rate will be imposed upon you and rate of interest goes up to 40% and it’s quite high as you can get personal loan with rate of interest lying between 18% to 24% .
2. CIBIL score
if you will not repay your dues, it will have a bad effect on your CIBIL score and this means it will have a bad impact on your credit history. This can create a problem as when you apply for loans you can get loans at low rate of interest if your CIBIL score is good.