Have you heard of a credit card, do you even know how it works? I asked a few people in Nigeria if they knew what a credit card was or if they had ever used one and alas, they didn’t have any idea of what a credit card will be explaining what a credit card is and how you can use it properly.
A credit card is a plastic card with a chip which is issued by a bank or any other financial institution which allows people use money they do not have currently and pay for it at the end of the month with interest. In simple words, a credit card is a card that allows you borrow money to buy stuffs in form of credits in which you can pay for in the nearest future when the money is available. A lot of people see credit cards as free money and so they misuse the money until when they need to pay the money back.
Credit card companies also give users rewards so they can keep using their services instead of that of others and this is in form of cashback or points. This process is one-way financial institution keep their customers to themselves. For cashback, the company would give you a penny or more for every dollar spent and with this, you get a cashback for using their credit cards, while others use points. With points, users can utilize for flight, at the cinema, lounges or gift cards dependent on point.
One thing that scares people off using a credit card is the interest rates. Credit cards charges from within 10% to as high as 22%. This is something that is troubling as those who understands how interest works. The interest rate matters if you are going to spend or use a credit card. Also, there are credit cards that charges fees, these things should be considered properly.
In conclusion, it is good to understand that a credit card can be used both locally and internationally and can be used by anyone with a regular income but one thing to consider is fees on foreign purchases. If you can carefully understand your credit cards and the terms around it, then you are good to go with using credit cards with no problems.
You can read more here
https://www.usbank.com/credit-cards/how-credit-cards-work.html#12312
https://creditcards.usnews.com/articles/how-credit-cards-work
https://www.moneyadviceservice.org.uk/en/articles/credit-cards