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Credit Card Loans - Payday LoansPeculiarities of the “plastic credit cards”
Today many banks offer plastic credit cards as a kind of a bank loan.
What's the difference between a credit card and an ordinary bank loan in cash?
The first difference is that the interest on conventional loan is compounded from the date of signing the loan agreement and you must pay the loan off regardless of whether you use the money or not. When you receive a credit on a plastic card, the interest you will pay only for actual use of money, for example, card payments any purchase or get cash from an ATM.
The second difference is that for the plastic card you can place a limit, adjusted only by your financial possibilities, as opposed to the loan for product purchase.
The third difference is that unlike the conventional loan, the credit limit begins to restore when the loan is prepaid.
The fourth difference is that the plastic credit card you can use to pay for goods and services, as well as withdraw cash anywhere in the world. Also, you can pay for goods and services through a worldwide network of Internet in online stores.
The fifth distinction is the so-called grace period. In all banks this period is set differently. The meaning of the grace period is that, if you used the borrowed funds from a plastic credit card and pay the loan during the grace period, interest is not charged. It is very convenient. If you pay off the debt within the grace period, the loan you get is really interest free.
Thus the interest rate for such loan is a few high! When the grace period is over, the bank starts charging interest on the loan and since the inception of the debt on the card.
So, what means a grace period?
Banks use one scheme of the grace period but with some species and a few differences.
The most common and it is used by most of the banks, for example, UniCredit Bank, Citibank and others, when the grace period works like this – in loan terms banks indicate the maximum possible grace period. In fact, in the grace period are included all days until the end of the month and about 20 days of the next month. ie if you make a purchase with a plastic card on the last day of the month, then you still have another 20-25 days of the grace period in next month. If you make a purchase on the first day of the month, the grace period would consist the current month (30 days) and 20-25 days of the next month, which counts the maximum number of days.
The difference number 2 - when the bank determines a grace period in 55 days. In this version instead the “fiscal month”, the bank uses a concept of "calculation period". The start of "calculation period" is tied to the date of the opening a bank account, ie the day when the credit card is issued. Just suppose that the beginning of the "calculation period" is tied to the 10th day of each month. And if you’ll pay off all the debt sum, appeared within the 10th day of the current month and the 10th day of the next month, within 55 days, than the interest will not be charged.
The difference number 3 – when the grace period consists of 60 days. Here, the grace period is tied to the calendar month. For example, if you used the card in July, this debt must be repaid during the August. But to use the grace period in the August, you should prepaid the July’s debt.
And the final difference - when the grace period starts from the time of the debt creation on the card (for example, when making a purchase) and lasts for as long as the bank stated at the conclusion of the loan agreement. For example, it consists of 50 days, and if you don’t want to pay an interest, you must repay the entire debt from 1 day to 50 day. Even if you make a purchase on 49th days, you have to repay up to the end of the 50th day.
It is very important to underline one very important nuance. What is the advantage of the credit card? Just suppose that you have to get the salary in a few days but you urgently need cash. So in this case the credit card can help you.