Using credit cards is being more popular these days as shopping tendency has risen more than before. They are the plastic cards issued by the banks. A credit card is mostly used by the customers to pay the merchant at POS terminals while buying goods and services.
Credit cards, as the name prevails, provide you the privilege to pay for products and services out of your own bank account in credit. It means the bank pays on your behalf for that particular payment if you pay through credit cards. Later on, you will repay the bank with that amount you have used. It applied additional charges and interests for the facility it provides through credit cards.
Are the core purpose of debit cards and credit cards the same? Not really!
Unlike other plastic cards like debit cards where your own bank balance is required to pay for any purchases, a credit card doesn’t require you to have that balance amount in your bank account to pay for the goods and services in advance.
For example, let’s assume you are buying a (say) iPhone 13 from any Apple store or e-commerce site and you do not have enough money to pay in cash or in the bank. In that case, you can use a credit card to buy it at the moment. This will help you meet your needs at your convenience that you do not need to check your bank balance.
However, you need to repay it in time. Otherwise, you’ll need to pay interest and additional charges to the bank issuing your credit card.
On the other hand, this service is not applicable to debit cards. You will need to have enough balance in your bank for the purchase of goods and services while you pay through your debit card.
Normally, we tend to avoid debt in our lives. But it is the debt that runs an economy and also it can be a huge benefit if we can use them correctly. Regarding his view on credit, the famous Rich Dad Poor Dad writer Robert T. Kiyosaki says,”
If you would like to know more, the benefits of using a credit card are:
- Using credit cards can raise your credit scores. It will be a great advantage as the bank will recognise your banking activities and categorise you into priority customer
- Credit card removes the problem of being unable to pay for your expenses when you have no enough bank balance
- Most banks provide discounts and cashbacks at the merchants while you pay using your credit cards
- You can have a hasslefree shopping experience without carrying cash
- Credit cards have a better protection than debit cards in the case of theft and frauds
Know how to benefit from credit cards
Mostly, credit cards are widely used in payment for the purchase of goods and services.
Even if you have nothing to purchase, you can take a credit card facility, draw cash or pay to others through it and repay it again within the billing cycle to avoid additional costs so that you can build up your credit score through credit cards. This helps you in getting loans from the banks when you need them the most. Credit is an important element to create trustworthiness. This way, you can build trust with your bank and enjoy the facilities of a priority customer.
How are the banks giving credit cards facility in Nepal?
Credit cards are issued by banks in order to promote credit usage by the banks. Moreover, the use of credit cards is not only limited to paying for purchases but also to withdrawing cash from ATMs if you require. And it comes with a billing cycle of 15 to 45 days. It means when you activate the credit card limit today (March 21, 2022), it will be valid till April 5, 2022, if it has a billing cycle of 15 days. If you have a credit card limit of Rs 50,000, you will be able to use that credit till April 5 and repay it later.
Similarly, banks like NIC Asia are allowing 0% interest on credit cards.
On the other hand, Nabil Bank is giving free issuance of multiple credit card facilities on fixed deposits of the same bank account. Moreover, the practice of buy now pay later is the main essence of issuing credit cards such that consumers can spend more.
Why do banks promote credit cards?
As we know, banks are the credit-creating institutions of an economy. Without them, capital accumulation is not possible because they are the ones that lend out loans out of their deposits to the businesses and people that an economy can foster.
On the consumer credit side, the issuance of credit cards plays a vital role in increasing consumption such that money can flow more often in the market. This will increase the money in circulation which will create more opportunities and foster economic growth.
Income from credit cards falls under both interest and non-interest income. The interest incurred in credit cards is the interest income and late payment fees and maintenance fees fall under the non-interest income.
Apart from that, the banks have also introduced Buy Now Pay Later plans through mobile banking which even doesn’t require a credit card. You can enjoy this facility through your mobile banking and use the scan and pay option through a QR code. Foneloan is hosting this service to the banking customers of Kumari Bank and Prabhu Bank. Other than that, there are Nabil Bank, Laxmi Bank, Century Commercial Bank, and Mega Bank which are providing Foneloan through mobile banking.