A Brief Introduction: Imagine a situation when one feels the need to purchase a commodity but is unable to do so, on account of shortage of hard cash. Similarly imagine another situation when one has to make payment by electronic mode only and one does not have access to the medium of payment.
The World of Three C’s: Who does not like Comfort, Convenience and Credit? Rarely can one find a person who does not like to experience the three C’s. If all the three are rolled into one, then it is like an icing on the cake. Is there a possibility of achieving all the three C’s?
Yes, there is an instrument which can guarantee all the three C’s. Such a wonder instrument is known in banking parlance as a credit card.
Questions which may arise in the mind of a layman: What is a credit card? How does it function? What are the benefits of using a credit card? Such questions can come to mind. Once the answers to the questions are provided, the matter would become absolutely clear.
Methodology of the functioning of the credit card: For a layman, a credit card is a piece of plastic which is said to replace or play the role of real money. For a banker it is a very intricate instrument which is capable of changing the economics. In fact this instrument has revolutionized banking all over the world.
How can a plastic contraption deliver the three C’s? Let us now learn as to how it is perfectly possible.
Yes, it is a piece of plastic but with a magnetic strip or a Subscriber Information Module (SIM) card which contains a lot of vital information. The days of barter exchange are over. Everything in the world is traded in terms of money. Money can change hands either physically or electronically. For an electronic transfer of money, there should be a medium through which the transaction can take place. This is where the bank makes its presence felt as it creates the medium to facilitate the transfer of funds.
A credit card is issued by a bank to the customer after going through the income details, loan repayment history, tax compliance etc. A specific limit is sanctioned over and above which the customer cannot use. The limits as well as the other vital details of the customer’s accounts are entered into the magnetic strip or the SIM card as the case may be. Lo and presto, this piece of plastic has now been converted into virtual money.
Convenience: This card can be used to make payments for purchasing articles etc. One need not carry huge wads of cash notes while going for shopping. Just a swipe of this wonder card would be enough. Is it not convenient now? This facility is also beneficial to the trader as well as he need not have to go to the bank to deposit cash or check as his account gets automatically credited.
Comfort: The proliferation of the internet all over the world has resulted in a situation wherein more and more payments have to be made through the online mode only. Under such circumstances one can use the credit card to make payments online from the comforts of one’s home. Is it not comfortable enough?
Credit: One more thing to be noted is that one need not have any money in the bank account at the time of using the card. One can use the card till the sanctioned limit is reached. The payment of the dues has to be done on or before the due date until which the credit period is available. Once payment is done on due date, the limit automatically gets revolved. Thus the credit angle too has been taken care of.
These are the benefits of a credit card in brief in addition to it being a sort of a status symbol.