Cost Factors Of Credit Card

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A credit card is a card issued by a financial company giving the holder an option to borrow funds, usually at point of sale. Interest usually begins one month after a purchase is made, and borrowing limits are pre-set according to the individual 's credit rating. (investopedia, 2016) Credit card usually charges interest rates and it is a best way for short term financing. A typical credit card is consist of issuing bank logo, EMV chip which is usually on smart card which makes card more safe and secure way of payment, Hologram, card number, card holder name and expiration date. Many credit card has a contactless chip which usually known as Tap. Which makes payments quickly and easily. Almost every store allows payments …show more content…
While applying for credit card there are two factors, which must need to be consider. They are cost factor and features factor. Cost factor consist of Annual Percentage Rate (APR), Grace period, Annual fees, Transaction fees. Annual percentage rate means the cost of loan. In simple words it makes us understand that how much money it will cost to borrow certain amount of money. For example, if APR is 10% than every 100$ you borrow you will pay 10$ interest. Therefore, to borrow 100$ it will cost you 10$. Grace period is the time period after which the payment becomes due. For example, if the last transaction day is 31st December and payment due date is 15th January than time period between 31st December and 15th January is know as grace period. Annual fees are really important factor that must be seen before applying for credit card. There are many credit cards in the market, which has no annual fees. Another really important factor is transaction fees and number of free transaction in a billing period. Moreover, while looking at the features factor the most important factor is credit limit, it gives a clear idea of how much we can borrow from the credit card. However, it is also important to see that how widely …show more content…
The 35% of credit score is affected by payment history. All lenders always checks payment history before lending money and no one wants to lend money if you don’t make regular payments. Regular payments are really important to build a good credit score. Regular payment reflects your character and it is also important to see that how sincere you are about paying off your debt. The 30% of the credit score is affected by how much credit you use. Your credit score is also affected when your credit is checked too many times. The score is affected because it reflects that you need huge amount of money on credit to pay for your necessities. Whereas, 15% of your credit score if affected by length of your credit history. Credit history reflects that how much credit you have used in past and how many payments you have made and how often you have made the payments. Credit history reflects your character. Longer credit history doesn’t means high credit score there are certain examples where person with shorter credit history has higher credit score than the person with the longer credit score. While the remaining credit score is affected by new line of credit. If you keep on applying for new line of credit your credit score will go down. It is highly recommended to make regular and full payments to use less credit, start building credit at younger

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