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Credit Cards

Credit cards are payment cards issued by financial institutions that allow cardholders to borrow funds to pay for goods and services. The credit provided is subject to a pre-set limit and usually comes with an interest charge if not repaid within a certain period.

Characteristics of Credit Cards:

  1. Credit Limit: Credit cards have a maximum amount that cardholders can borrow, known as the credit limit.
  2. Grace Period: They usually come with a grace period during which no interest is charged if the balance is paid in full.
  3. Minimum Payment: Cardholders are required to make a minimum payment by a specific due date each month.
  4. Interest Charges: Interest is charged on the outstanding balance if not paid in full by the due date.
  5. Revolving Credit: Credit cards offer revolving credit, meaning as you pay off your balance, your available credit is replenished.
  6. Credit Convert to EMI: Some credit cards offer the feature to convert high-value purchases into Equated Monthly Installments (EMIs), enabling cardholders to pay back the amount over a specified period with interest.
  7. Credit Increasing Limit: Over time, with responsible usage and timely repayment, cardholders may be offered an increased credit limit by the issuing institution.

Benefits of Credit Cards:

  1. Convenience: Credit cards provide a convenient way to make purchases, both in-store and online, without carrying cash.
  2. Build Credit History: Responsible use of a credit card can help build a positive credit history, which is beneficial for future financial transactions like getting a loan.
  3. Cash Flow Management: They provide a way to manage cash flow by allowing you to make purchases now and pay for them later.
  4. Rewards and Cash Back: Many credit cards offer rewards, cash back, or other incentives on purchases.
  5. Emergency Funding: Credit cards can serve as an emergency fund in case of unexpected expenses.
  6. Fraud Protection: Many credit cards offer fraud protection features that shield cardholders from unauthorized transactions.
  7. Global Acceptance: Credit cards are widely accepted worldwide, making them a handy tool for travelers.

Credit cards, when used wisely, can be a valuable financial tool, providing convenience, financial flexibility, and opportunities to earn rewards. However, it's essential to manage credit card usage responsibly to avoid accruing high-interest debt and negatively impacting your credit score.

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