Every store, big, medium or small in enterprise accepts credit cards. Even though many financial advisors warn that the credit card encourages over spending, people continue to prefer using a credit card to shopping with cash even departmental stores and supermarkets encourage the use of credit cards. To use the credit card to maximum benefit, one must understand how a credit card works. Given that there are several types of credit cards in the market today, it is quite a task understanding how one differs from the other in function, benefits and general utility.

The process begins with obtaining a credit card account. One can do so in a bank or a credit card company. Before applying for a credit card account one must do a background check on the various credit card offers made by credit card companies. This will reveal the best credit card option for you. After determining which company best suits your requirements, the next step is to apply for an account. This will require you to furnish the mandatory documents such as personal details and records of age proof, employment status and other financial commitments.

Credit card companies are also interested in the other financial commitments a person has, as it will definitely affect the regularity of payments made by the person. After assessing the financial status of a person, the company may decide to approve the account, following which an account, in the person’s name will be created. The Account holder is now entitled to use the credit card within the regulations prescribed by the company.

The credit card can be utilized to purchase items within the credit limit specified by the company. The payments on these purchases will include interest which is tabulated based on the interest rate prescribed by the company. The total amount payable is to be paid every month. Failing which, a late fee will be added to the total amount payable.

Most credit companies distinguish between total amount payable and minimum amount payable. The total amount payable is the sum that the card holder owes the credit card company in full. The minimum amount payable is the minimum sum that is to be paid every month. If the card holder pays an amount above the minimum amount payable, then the additional amount is subtracted from the total amount. Transactions made through the credit card are recorded through the personal identification number placed on every credit card. The PIN can also be used as a security device for the credit card.

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