Finance Management

With the unstoppable progress in technology, life seemingly has been simplified to an obvious level. Where, once upon a time , anxious users would carry next to their quivering bosoms, large sums of money; today the use of plastic money has overtaken any other form of payment system. Thereby making dreams seem just a swipe away.

The concept of credit cards can be understood in a simplified way by a systemic approach to the topic as shown below:-

• Definition
• Concept or Principles
• Interest Rates/ System of Back payments
• Variants

Credit Card

      A credit card can be described as the clichéd plastic money, as it is a plastic card, with a magnetic strip behind, which aids the transfer of data. These cards are issued to a user from a credit union or bank, allowing the user to buy through relevant vendors or take a cash advance. All cards are designed as per the ISO/IEC 7810 as ID -1., which is 85.60 x 53.90mm.

Concept or Principles of a credit card

      The credit card enters the user into a loop, which caters one line of cash transfer to the user, through which he borrows the money under the promise of returning it. Unlike other cards, the user is allowed to have a static or constant debt, on which he pays the interest decided, which is certainly more than any other forms of debt.

Interest Rates/ System of Back payments

      The banks or the credit unions waiver interest if the entire payment is made within the grace period & in circumstances where the user cannot refund the balance, then interest is calculated starting from the day of purchase, since when the money has been flowing to the present date on the entire , actual amount of purchase.

      Therefore if the user bought stuff for Rs 500 on a certain date and carried a debt of Rs 10  beyond the stipulated period, then interest will be calculated from the date when the user bought the stuff, on the entire Rs 500, till the present date.

Formula for calculating Interest in use of a credit card

The standard formula used everywhere is as follows:-

                                          APR/100 x ABD/365 x the number of days.

                                          APR: Annual Percentage Rate

                                          ABD: Average Daily Balance

Great new To the Users

◦   The basic benefit to the user is that of convenience

◦   No calculation of basic balance before credit, however shouldn’t exceed the credit line determined.

◦   Better fraud prevention than the counterpart cards.

Variants

Charge cards : Require the entire debit to be paid by the end of the month

Debit cards: Can be used as currency by the user, using the actual balance and no credit