Credit Card Essentials: Understanding Key Features


A credit card is handy when cash is not readily available for daily expenses. When used properly, a credit card can provide a repayment period of at least 45 days without incurring additional charges. Learn about these five myths about credit cards.

Before using a credit card, knowing several vital factors is essential. In addition to the special offers provided by different cards, it’s crucial to understand the minimum payment due, due date, and credit limit. Let’s explore some important aspects related to credit cards:

Credit Period: When you make purchases with a credit card, you typically have around 40-45 days to repay the money. Credit cards operate on revolving credit, allowing you to spend money, repay it, and then borrow again.

Missed Payments: If you miss a repayment, you will be charged a high interest rate. Therefore, paying the total amount on time is advisable to avoid interest charges.

Common Misconceptions About Credit Cards:

Annual Fee: Contrary to popular belief, credit cards do not provide free money. Additionally, using the card usually involves paying a yearly fee.

If you fail to repay within the due date, you’ll also be charged interest daily. Moreover, credit card offers may tempt you to make unnecessary purchases, so it’s essential to be cautious.

Minimum Dues: Many people mistakenly believe that paying the minimum dues is sufficient. However, this only increases the amount owed and substantially increases the interest on the remaining balance.

Furthermore, interest is payable for the 45 “interest-free” days before the due date, and your credit score may be impacted.

Cash Withdrawal Limit: It’s often misunderstood that a credit card’s credit limit allows you to withdraw cash up to that amount. This is incorrect.

The cash withdrawal limit is often significantly lower than the credit limit. It’s important to note that interest is also calculated on cash withdrawals.

Multiple Credit Cards: Some consumers believe having various credit cards can harm their credit score. However, having more than one card can lower your credit utilization ratio, which can be beneficial, reducing your average spending on each card and improving your credit score.

Annual Fee: Another misconception is that credit cards with “zero” or low annual fees are superior. However, low annual fee cards can be detrimental if they charge high interest rates on outstanding balances.

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