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What is a credit card?

Nowadays, most purchases are made electronically by credit or debit cards.

Nowadays, most purchases are made electronically by credit or debit cards.

It is much more convenient now to pay by credit card, which is also a good security against thieves. In the past, when cash payments were generally ubiquitous, shepherds often took the opportunity to steal banknotes from people’s purses. But now that most of the income is in a person’s bank account and shopping, only a small piece of plastic on the Internet and elsewhere is more secure that money won’t be stolen. Credit card nowadays is a convenient, simple and quite common way to buy everything you need.

Although the electronic payment system has been in use for quite some time, some people still do not know what a credit card really is and what benefits it can offer. A credit card is a bank payment card that can be obtained when entering into an agreement with the bank in question. It is possible to get a credit card at any Latvian bank – you just have to choose one, as there are several types of credit cards that offer different advantages. Some types of credit cards are MasterCard, Visa, American Express and others. They are also further subdivided into interest-free credit cards, standard, gold, platinum and more.

A credit card offers all the same benefits as a debit card.

A credit card offers all the same benefits as a debit card.

Credit cards can be used to pay in shops, at gas stations, and to make various payments on the Internet. With the help of a credit card one can book hotels, hotels, also airplane tickets. Of course, it is also possible to withdraw cash from a credit card through ATMs or to deposit money in your checking account. All settlements can be made not only in Latvia but also abroad. In addition to all these options, credit cards often provide different discount systems and bonuses. However, the main advantage of credit cards is that once all the money in the person’s current account linked to the credit card is exhausted, the bank offers the option of using a credit limit. This means that one can finally shop for a certain amount of money, determined by a credit card contract, at the end of his or her own money. It works just like a cash loan – a person borrows money and then pays it back. As with other types of credit, the credit card has a certain amount of interest to be paid in the event that one has overdrawn their funds and uses the credit limit.

If the person has used the money from the established credit limit, then it is reckoned that this money has to be repaid. There are several types of refunds. The most popular and advantageous way to get a refund is when a person repays the excess money within 30 days. In this case, you do not have to pay interest on the credit limit. However, if the loan cannot be repaid so quickly, you will have to pay interest either for the period the money is repaid or the amount to be repaid. Of course, the entire repayment process and the amount of interest, the bank employee and the credit card holder, agree from the very beginning when the credit card agreement is made.

Unlike fast loans, credit lines, and other quick cash loans, credit cards have a lower interest rate. Of course, this is different for each bank, but the average annual interest rate is around 30%. Also, unlike fast loans, it is possible to repay the loan in installments, which makes it easier for the person to repay the loan if the amount has been several hundred euros.

Credit cards are a good option if, for example, there are a few days left until payday and your current account is gone. In this situation it is possible to use the credit limit set for the credit card. When the salary is credited to the person’s account, the loan amount is repaid immediately. Since the first 30 days are free of interest on a cash loan, this kind of cash loan is quite beneficial and does not force a person to spend more money.

The bank sets the credit limit for the credit card individually for each customer. Often the credit limit is set at 3 monthly salaries. Of course, there are also specific amounts, like $ 5,000, but a bank employee negotiates a credit card agreement with each customer. Amounts are determined based on the customer’s solvency and income position.

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