Once A Week Cape Town, South Africa | How Do Credit Cards Work?
When you need to make a purchase or pay a payment, credit cards in South Africa may provide both convenience and the opportunity to save money if you are collecting rewards. In addition, you may utilize credit cards to establish positive credit history through responsible financial practices. While credit cards and debit cards may appear identical, their functions are vastly distinct. If you're new to utilizing credit, you should be aware of a few credit card facts.
What Does Credit Card Do?
Credit cards may be used to make purchases, pay bills, and, in certain cases, withdraw cash. A credit card is most easily understood as a form of short-term borrowing.
When you create an account for a credit card, the credit card issuer assigns you a credit limit. This is simply the amount of money the credit card issuer enables you to spend or pay bills with. As charges are made to the card, the available credit decreases. Then, you reimburse the credit card company for all charges made against your credit limit.
How Credit Cards Function
Credit cards may be used to make online and in-store purchases as well as bill payments. The merchant's bank is notified of your card data when using a credit card for either. The bank then obtains authorisation for the transaction from the credit card network. Your card issuer must next validate your details and either allow or deny the transaction.
If the transaction is accepted, payment is made to the merchant and the amount of the transaction is deducted from your available credit. At the end of your billing cycle, your card issuer will give you a statement detailing the month's transactions, your old amount, your current balance, the minimum payment needed, and the date by which it is due.
The grace period is the time between the date of a card purchase and the due date indicated on the statement. If you pay your payment in full by the due date, you will not incur any interest costs during this period.
However, if you carry a balance from month to month, your card issuer may impose interest charges. Annual percentage rate or APR indicates the yearly cost of holding a load on your credit card. Your annual percentage rate (APR) comprises your interest rate as well as extra fees, such as an annual fee if your card has one.
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