Credit Card Definition –
Credit card is basically a financial tool /service provided by the banks which enables people to make cashless transactions. Banks do set a pre-set credit limit while providing the cards to the customer. This pre-set credit limit is basically determined by your credit score, credit history and annual income. People can use the credit card everywhere possible be like petrol pumps, shopping malls, grocery shops etc. Every bank generates the credit card bill on a particular cycle/time period for each customer. Post receipt of the bill, customer has to make the complete payment with in that period.
If they miss out to make payment with in that period, then interest is applied on the amount. Also late payments affects your credit score. People having good credit score tend to get loan’s easier at lower interest than the people having bad credit score. People do tend to get confused between credit card and debit card. Both are not same.
When you use the debit card, the amount gets directly detected from your bank account. Whereas when you use the credit card, the amount gets reduced from your credit limit. For example, if a bank is proving you the credit card with a limit of INR 2 lakh and if you have used the card to purchase something for about INR 50,000. Then the balance credit limit would be 1.5 lakh INR. Also customer would not be able to use the card beyond the credit limit of INR 2lakh.
Credit cards creates a borrowing tendency for the customers. They tends to purchase things through credit cards due to this habit of borrowing. Banks are now providing life time credit card free of cost if the customer uses it every year for a certain amount. Now banks are providing loans also on credit cards. Major benefit for the customer is the convenience. If customer does not have money in his or her account for the time being, even then he/she can buy things and repay it with in the grace period without any interest.
The first credit card was launched by Central bank of India in 1980.