What is a credit card and how does it work?

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Do you want to make a purchase but do not have cash? Do you know how a credit card worksIn this post we explain what a credit card consists of , what are its advantages and other elements to take into account, so that you can make use of this important payment tool.

Credit card: What is it?

The credit card is a means of payment, which allows you to make purchases and cancel said value later. It is called “credit” because the amount you use when making the purchase corresponds to a loan granted by the financial institution.

By making use of this product, the bank or financial institution authorizes you to use a certain amount of money to pay for goods or services, the merchant being the one that collects the value and then the bank will send you an extract, in which you It will notify the value of the cost or service that you purchased, the interest rate that will be charged and the associated costs that this operation would have.

Credit card: Advantages

Among the main advantages of credit cards we can find:

  • No interest is accrued if the purchase is deferred to a single payment.
  • It allows access to a balance higher than that normally available in the account, according to the level of income.
  • It allows you to have additional benefits, such as: redemption of points to buy items, credit money, travel, as well as access to promotions and discounts with associated businesses.
  • It is possible to obtain insurance, such as: medical assistance, accidents, life, against theft or others.
  • It favors the credit history, and increases the possibility of having the approval of financial entities for the granting of credits  or other products.

Credit card: Disadvantages

Among the main disadvantages of credit cards are:

  • There is the possibility of financial difficulties, if you lose control of monthly spending.
  • Some of the commissions for different operations can be very high. 
  • If your credit card is lost or stolen, this can generate some problems, for this reason it is advisable to report theft or loss immediately and buy insurance to avoid these problems.
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