What is a credit card?
Credit (Credit Card) is a type of bank card with payment feature without the available money in the card, allowing the cardholder to borrow money from the bank with the credit limit allowed to make payments. In other words, you will borrow money from the bank to pay and at the end of the period you will need to return it to the bank in full.
As long as the credit card holder pays within the specified time (usually 45 days), no additional fees will be charged for the card. If after this time, the bank will calculate interest based on the amount of credit cardholders have "temporarily borrowed" the bank.
The amount of a credit card issued by a bank is called a credit card limit. Depending on the card application as well as the conditions that you meet with the bank, this limit will be high or low. Once approved by the bank and accepted to open a credit card, you can use it to pay for convenient services such as shopping, entertainment, travel ... very convenient.
Currently, there are 2 types of credit cards:
- Domestic card: Domestic payment only.
- International card: Mastercard / Visa link, payment at home and abroad.
What does a credit card do?
Nowadays, owning a credit card is not so much difficult. You can open a Mastercard credit card at most banks currently in Vietnam. Each type of bank card has different credit limits, usage purposes and interest rates, applicable fee schedule. But about the function of a credit card, you can understand the most simple but complete is the credit card used to pay for the services used. This is an important feature of credit cards. In addition to the payment feature, credit cards also feature withdrawals. Withdrawals are advised by experts to minimize them.
- Payment features: With the meaning of spending first and paying later, you can pay for purchases, services that have to be paid at home and abroad. You have 45 days to pay with no interest applied. After the above period, you will have to pay the bank with the full form of interest calculation.
- Cash withdrawals: Although equipped with this feature, practical advice for you should not use and must use if limited. Because the withdrawal fee with interest rates applied to the withdrawn amount is quite high.
Benefits and disadvantages of credit cards
|You can easily make large purchases and repay small amounts||Debt is easy if you are not careful with spending|
|Credit card statements make it easier to draft your budget||The convenience of credit cards can cause cardholders to overuse|
|Safe and convenient when you don't need cash||Interest rates can cause smaller debt packages to grow larger over time|
|Building credit scores, very useful when you make loan transactions with the bank later||Many risks arise when disclosing personal information on the card|
Card issuing process
Step 1: Customers come to the bank to fill out the card opening request form and provide proof of income as prescribed by the bank.
Step 2: The bank will conduct the appraisal after receiving the full file of the customer, then check the accuracy of the documents that the customer provides as well as the customer's ability to repay the debt.
Step 3: The bank will conduct a classification to grant a credit line based on the profile of customers that have met certain conditions.
Step 4: The bank will proceed to enter customer information data into the management system, encrypt this information on the card, and require the cardholder to sign and register the sample signature at the bank before delivering the card to the customer.
Step 5: Customers come to the receiving bank, and after receiving the card, customers need to keep personal information on the card and CSC (Card Security Code). If there is a risk arising from the customer disclosing information, the customer is solely responsible.
Typically, the time from the time the customer applies for a card issue to the time of receiving the card is from 5-7 working days.
How to pay credit card balance
By the day of payment, the credit card holder may pay the whole outstanding balance at the end of the period or at least pay in the following forms:
Automatic payment: You can register with the service bank to automatically withdraw money from payment account to pay your credit card balance (minimum payment amount or full debit). This is a simple and fast way to pay, ensuring that cardholders pay their debts on time. However, you need to maintain the balance in the payment account equal to or more than the balance in the statement before the payment is due.
Cash payment: Cardholders can go to the card issuing bank to deposit cash to pay credit card debt. In addition, some current ATMs of some banks have added the function of direct cash payment, cardholders can pay credit debts via ATM.
Transfer: Cardholders can transfer via Internet Banking or choose credit card payment function at ATMs (depending on whether the card issuer's ATM supports this function).
Payment from other banks: You can transfer from another bank to the credit card account of the card issuing bank to pay the outstanding credit.
Note: When using the credit card payment method by ATM (cash deposit or bank transfer), if the payment is made before 17:17 in the working days, the payment will be recorded on that day. If the payment is made after XNUMX:XNUMX on working days or on holidays, the payment of outstanding credit will be recorded by the bank on the next working day.
How to calculate the credit card payment date
Credit cardholders have 45 days of interest free, interest free (subject to bank regulations). After this time, if you do not pay off your credit card balance, the bank will start charging interest based on the total outstanding balance at the end of the period.
On the monthly statement date, the bank will send you the statement of transactions for the month via the email address you have registered with the bank. After that, you have an additional 15 days to pay off your outstanding balance.
For example: You will receive your credit card statement this month on September 28, the due date is October 09. All transactions arising after the statement date of the previous period (ie August 13) will be exempt from interest and included in the statement of the next period (September 10). Your 28 day interest free period will include 08 month and 28 days free interest. You need to pay the full balance on your statement before October 09. After this time, the outstanding balance on the statement made on September 45 will start to be charged interest. In addition, to take advantage of 1 days of interest free for the next period, you should make transactions on September 15.
Rules to remember when using a credit card
Card information security
When making online payment, you only need to enter the information printed on the card with CSC (Card Security Code) - the card security code is able to make the payment. If the cardholder shares this confidential information with many people, the risk of personal information theft is very high.
Credit cards do not require a PIN when making transactions at the checkout. This is convenient and easy for cardholders but it is very risky if it is lost. So, when you lose your credit card, you should call the bank to request a card lock, avoiding the unfortunate risks.
Using a credit card means borrowing
Unlike a Debit or ATM card, the amount used to pay on a credit card is essentially the amount you are borrowing from the bank with 0% interest rate (for 45 days interest free). By the time of payment, you still have to repay all the money "temporarily borrowed". If the cardholder has not been able to pay the entire outstanding loan to the bank on the payment date, the bank will start charging a fairly high interest rate (about 26% to 31%) based on the current balance on the credit card. Therefore, when making transactions using credit cards, you should consider your ability to repay your debt at the end of the month, avoiding the risk of falling into debt.
Pay attention when giving the card to the cashier
Many credit cardholders when shopping at restaurants, shopping centers often give their cards to the cashier so that they can make payment and never pay attention to the card. This habit can put cardholders at a high risk of personal information theft if the employee accidentally captures confidential information printed on the card.
Therefore, when giving the card to the waiter or cashier, you should pay attention to directly supervise the process of swiping the card, and carefully check the information on the printed paper slip.
Pay attention to the time of payment
Depending on the credibility of customers, the bank will issue different credit limits. Credit cardholders will receive a 45-day interest free "provisional" loan After this time, if the cardholder is late in payment or only pays the minimum amount, the bank will start calculating the interest rate on the total closing balance in the statement as well as collecting late payment penalty. Therefore, credit cardholders need to have plans to control spending, ability to pay on time to enjoy preferential interest rates, limit the fees incurred.
Do not use credit cards like ATM cards
Banks do not recommend using credit cards to withdraw cash like ATM cards. Therefore, if you use a credit card to withdraw cash, you will incur a fairly high fee (usually 1% - 4% of the amount withdrawn). Therefore, cash withdrawals should only be made with credit cards when absolutely necessary.
If used smartly and properly, credit cards will be a very useful means of payment, preventing many risks when paying with cash. On the contrary, if used without control, it is easy for credit cardholders to fall into debt spiral. Therefore, when using a credit card, the cardholder needs to master the important principles as well as balance the loan needs with the ability to repay.