Most people don't buy credit card simply because they are unaware of how it works. Understanding how it works enable to come out of your inhibitions. Here is what happens when you give your card to merchant.

Credit cards also known as plastic money comes with advantage that will allow you to purchase now and pay later option.

How it works?

The merchant swipes the card through machine which instantly read all the details pertaining to card with the help of magnetic strip at the back of your credit card. The merchandiser than feeds the purchase amount and after you enter the PIN, the machine connects to the issuing bank of the card via telephone lines. Verification is done at this stage such as limit of the customer, whether it has been reported as lost or stolen. Once verified, it sends the two transaction slips, one needs to be signed by you and return to merchant and other copy is given to you for your reference.

Credit cards are issued on individual capacity depending on his age and his monthly income. Before buying one should confirm the interest rate they charge. Credit cards are usually charged at a rate of 3.35 - 3.49% per month. However, it varies from bank to bank.

Here are 9 points which one should consider before buying a credit card

1 Credit card can be used alternative to hard cash
2 Every Credit card has different limit, depending on individual income and request.
3 Credit statement helps in maintaining record for all transactions
4 There are regular credit card charges(usually yearly, or on lost cards)
5 One can make use of grace period offered by banks to make payment.
6 Delay in payment of bills after the due date will attract late payment fees, which will added to your next billing amount.
7 In case of withdrawal higher fees are charged
8 Credit cards offer exciting offers, rewards points and discounts
9 Service tax is applicable.

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