Understanding how a credit card works helps you to know in which cases it is convenient to use it, if it is worth paying the interest, what the monthly commission is like and, most importantly, knowing what the credit card numbers are for that when you want to make a purchase online you can find them quickly.
Let’s start with what a card can do:
.- Lend you money to buy products or services and pay them the following month or in installments.
.- Give you cash, known as a money order, to use immediately.
Let’s get to know the cards a little more …
What are the credit card numbers?
There are three key numbers on the plastic of your credit card that you should know:
1.- Card number: it is a series of 16 numbers that are on the main face of the plastic.
2.- Expiration date: month and year, it is located under the credit card numbers. They are four -the first two represent the month and the two at the end are the year- separated by a bar (/).
For example, if a card expires in May 2025, the plastic number will be: 05/25.
3.- Security code: three digits on the back on most cards. They are generally located on a white band. In American Express the number is usually on the front of the card and is four digits.
The other important fact is that when they ask for the name of the owner, you have to put the name as it appears written on the plastic, if the second or last name appears abbreviated, you have to place it in the same way.
These four data are important for online purchases, since they are always asked for in the purchase forms.
Now we are going to the operation.
How does a credit card work?
The card assigns you a share of money to buy or wire it. Then you have to return it according to the installments you chose. It is similar to a consumer credit.
Simple no? It seems, but you also have to understand how other credit card mechanisms work so that it doesn’t get out of hand.
Credit card interest rates
Interest is the key to understanding how a credit card works. It is an amount that is applied to the fees of your purchases with the aim of charging you for the money that the card lends you. There are generally three types of interest:
.- Interest in installments.
.- Rotating interest (the most dangerous applied in the “minimum payment”).
.- Interest for advance.
All three make monthly fees go up in value depending on what is stipulated in the contract. Therefore, it is important that you carefully review the interests that the bank applies to purchases and advances. If you want to know how your credit card and interest works, you can check this post.
Monthly maintenance charge
This is another of the costs that mark how a credit card works. This is an amount that is included monthly and is the cost for using the plastic. If you want to know all the details of this charge and others, check out a special content for that matter.
Keys on how a credit card works for payments
You also need to know how credit card payments work. There are two options: that you keep tidy accounts and that your card becomes your ally to get everything you want. Or that you mess up and become your worst nightmare.
Keep these points in mind to be your ally.
1.- Pay in a single installment
If you keep good control of your expenses, we recommend paying your purchases in a single installment to avoid paying interest and maintenance costs. You may have collected 80% of the value of what you want to buy and you know that you will have the remaining 20% at the end of the month, so if you want to accelerate the purchase, you can use the credit.
2.- Pay the full debt of the month
It is essential that when the monthly summary arrives you pay the total amount, if you only pay the minimum the debt will become enormous and you will end up paying much more. If you pay the minimum, everything you don’t pay goes to interest.
3.- Late payment
Nothing worse than not paying the monthly fee. If you do that, the rotating interest is applied, a kind of monetary fine that triggers the final price for which you bought a product. The interest rate is applied from the day after maturity until you pay it.
International and internet shopping
Using your card abroad is easy, but you must notify your bank to enable it before leaving Chile. You can even wire money. For online purchases, today there is also the option of obtaining a “virtual prepaid card”, which allows you to buy more securely by avoiding entering your key data on a fraudulent site.
Here is more information to avoid phishing in international card purchases.Now with all this information about how a credit card works, go through our comparator and choose for you the best credit card.