Today, having a credit card has become a basic necessity, the possibility of being able to buy that gadgets, travel, shopping, and others today and pay for it later thanks to credit, is an opportunity that few can pass up.

But do you know what a credit card is?

A credit card is a means of payment, which allows you to make purchases and pay for them later. It is called “credit” because the amount you use to make the purchase is kind of a loan granted by the financial institution.

When you make use of this product, the bank or financial entity authorizes you to use a certain amount of money to pay for goods or services. And then the bank will send you a statement, in which it will notify you the value of the cost or service that you acquired, the interest rate that will be charged and the associated costs that this operation would have.

So, it is very important that before you dive into the world of credit the following 5 things you must be aware of credit cards.

(1) The bank does not determine the places where you can use it: One of the things you did not know about your card is that the bank does not determine the acceptance of your card. Acceptance means the places where it is accepted, for example, online or abroad. There are different companies that provide their brand so that the plastic is accepted in different places, for example, MasterCard, VISA, CARNET, etc.

(2) The plastic is property of the bank: The bank only lends you the plastic so that you can use it as a means of disposition of your authorized credit line. But when you decide to terminate your contract, you must return or break the card, since it is not yours, it belongs to the financial institution.

(3) It helps you in emergencies: If you are going through an emergency with your card, for example, the cashier did not give you the money or charges are being reflected in your bank application. Directly on your card you can locate the number to report these events.

(4) Cash withdrawals generate a commission and daily interest: You must be careful when you make a cash withdrawal because you must first pay a withdrawal fee, usually 10% of the amount of your withdrawal. Cash withdrawals generate a daily interest, which is applied to your account statement from the moment you make the withdrawal.

(5) Transactions and the credit bureau: After your payment date, you have more than 40 days for those movements to be reflected in your special credit report. For example, if you paid on time, after 40 days the timely payment will be reflected in your credit history. But if you did not pay or paid only a part of your debt, that negative mark will also be reflected in your credit history for up to 40 days.

Remember that having a credit card and managing it responsibly can bring you great benefits. So never forget to get as much information possible before applying for a card.

Author Bio:

I am Nikesh Mehta, owner and writer of this site.

I’m an analytics and digital marketing professional and also love writing on finance and technology industry during my spare time. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business. I can be reached at nikeshmehta@allonmoney.com or LinkedIn profile.