How does a credit card work? (Part-1)




A credit card is one of the best forms of payment (that you may not have experienced yet) for its usefulness and convenience. But it is unfortunate that people often make some misuses of it(credit card) due to not having proper and adequate knowledge of using it.  That can have serious financial consequences.

If you wish to make proper use of credit card and stave off the dangers concerning finance, this article can be helpful for understanding the nature, uses and limitations of credit card.

The following information you may be familiar with are about the facts of credit card.

What do you understand by a credit card?

If you assume a credit card made up with a logo of the bank and inscription of numbers on it, then your assumption is partially right (on a perfunctory level). Keeping the outer appearance aside, credit cards are generally a different form of payment that gives you the opportunity to borrow a small amount of money from a bank or a FI (Financial Institution).

Borrowing and taking loan are not same. The latter is of borrowing for long-term basis. On the contrary a credit card will allow you to borrow typically a small amount of money that you must pay off within a short span of time.

Mostly, every bank introduces categories of credit card but popular and common credit card users are – EBL, SCB, Brac, HSBC, Citibank, American Express etc.

If you wish to avail a credit card, what you have to do is complete the application form at any branch of the bank or online.

As soon as your application has been assessed and authorized, you will be provided with a line of credit displaying  the exact amount you want to borrow (for example, $1000). Then the credit card will be sent to you via mail. Never forget to sign on the back of the card when you get it.

How can a credit card be used?

When you will receive the credit card via mail and activate, you can use it anywhere you want. But it will not be a right decision to go shopping on mall just on the day you get it.

Keep it in your mind that a credit card gives you the opportunity to borrow money that is not of your own. For you must pay it back.

The following ways a credit card user can follow to make their credit card usable:

  • Purchasing at local or foreign, retain establishments
  • Making purchases online.
  • Paying the bill.

Regarding where you can swipe the credit card, remember that  there are some fixed online and physical establishments that will accept your credit card only from popular financial services brands- for example Mastercard, VISA and American Express ( AMEX).

If you have only a VISA card, you cannot buy anything from a retailer that accepts American Express only; because transaction cannot be done by this way. For these reasons, there are many credit card users who would like to have a mix of leastwise Mastercard and VISA cards in case of a retailer accepting only card of a particular brand.(To be continued)

Kirtton Chandro Das's picture

About the Author

About: 

Kirtton, who is a freelance writer of  web contents and newspaper editorials, is presently studying at University of Dhaka.