Partial Credit Card Payment – A credit card is a piece of plastic that consists of an identification of an individual engraved on it. The identity form is in the form of a signature or a picture. The purpose of this card is to charge money from the owner of the card for purchasing goods and services through an account linked with the credit card. When the purchase is made, the cost of the good or service is deducted from the amount present in the account.
Debit cards or credit cards for partial payments:
People are constantly engaged in the argument of whether it is better to use a credit card or debit cards in their daily lives for making purchases and their costs of partial payments. The payment in credit cards and debit cards differ in several ways. In credit cards, the credit card companies take monthly charges on the purchases made using credit cards. In debit cards, the amount used to make purchases is directly deducted from one’s bank account.
Credit and debit cards are similar in several ways. They both consist of an expiration date, personal identification number and even look identical. However, the differences are in the way they are in use. Both have different objectives and several advantages and disadvantages over one another. With a debit card, a person can make a purchase of an item and the cost of it is deducted from the money present in the buyer’s bank account. A credit card, on the other hand, allows its users to borrow money to a specified limit for buying a product or withdrawing some cash.
A credit card is a different form of currency that acts as an alternative for cash. There are credit card companies that provide these cards to people wanting them. In this way, the companies also can perceive some benefits. Credit cards are also made of metal and are issued by a bank or a financial company. One example of a credit card is the Chase Sapphire Reserve.
The cost of the goods will be refunded
A credit card provides additional warranties for certain goods other than the warranties given by retailers for their products. If someone buys a product and the credit card company provides the warranties. Even though the retailers of the goods do not give any warranty, the cost of the goods will be refunded. The money of the product is given to the individual upon inspection that their claim is valid. Such a benefit will only come if one has price protection built to help replace stolen or defective goods.
Credit cards tend to have more protection in case of theft or robbery of credit cards. The extend of care provided by the credit card companies in such cases depends upon the time when the card was reported stolen or missing. If a person is a victim of such an incident, it must be immediately reported. A credit card company will not compensate more than $50 of the spending, made before the card is reported stolen.
The Electronic Fraud Act provides liability with a loss or theft of credit card for forty-eight hours and compensates an amount up to $5000. Moreover, the Fair Credit Billing act permits the card users to challenge the case of unauthorized purchases or purchase of damaged or defective goods. It also allows the reversal of the purchase only if the seller wishes to do so.
Debit card users have to wait until the investigation
Debit card users have to wait until the investigation is over to retrieve the costs of any unauthorized purchases made. Additionally, credit card users are not charged with disputed charges. The deducted amount is restored quickly. It is only the withdrawal of the dispute by the opposing party.
When a person goes to a car renting agency, he has to fill a form and put in the credit card details in case of collisions. Even if a person provides the debit card details, the credit card details are still asked for in case of an emergency. The only alternative to avail the service of the rental agency is to deposit an additional few hundred dollars as surety. It is for people who are not comfortable dealing with credit cards.
According to this system, the companies issuing the credit card would charge an amount from their customers after a specified amount of time. The amount was taken as charges to use the credit card and, the time was usually one month. In addition to that, they also pay the cost of 4-7 percent of the total bill made on a purchase.
In the later years, credit cards were adopted by banks as well. The banks make an account for the credit card holder and make a bill for all the purchases made. The bills are paid by the users, either in total amount or in installments. Almost every renounced business in the world permits its customers to make purchases via a credit card. It has made using a credit card the most famous means of purchasing in the world today.
The world permits its customers to make purchases via a credit card
The reason is that using a credit card is quick and easy. When a person wants to buy goods using cash, it is time-consuming particularly if it is an expensive item. Moreover, there is a greater chance of errors when dealing with money in hand, and. The process is repeated several times to remove any possible errors in counting the amount of the cash for the purchase.
There are also several benefits of using a debit card instead of a credit card. One advantage is that a person using a debit card is safe for debts. When a person makes a purchase using his debit card, he is deducting money from his account. On a credit card, the person is borrowing the money of the financial company. And the money is required to be returned with the additional cost of interests. A credit card may also financially constrain the users as users are required to pay the fees of using the card every month.
Thus debit card users are safe from high-interest debts. Furthermore, renowned debit card issuers such as VISA are providing more protection to its users. When compared to credit card users. Debit card users are free to form the unnecessary charges that are imposed on credit card users. There is no fee for withdrawing or purchase and no interest rate. Debit card users are also free from charges for checking their respective accounts, unlike credit card users.
Making a partial credit card payment:
A typical credit card has two sides, with different details of the card on either side. One side of the cards consists of a microchip, card number, cardholder’s name, and expiration date engraved. The other cards include the CVC code, a hologram, and the card owner’s signature. The other side of credit cards has a magnetic strip. When making a purchase. The part of the card containing the strip is brought in contact with the credit card machine and. Then the purchase is made if the card has the required amount for the item.
A partial credit card payment is the payment of an amount. That is less than the amount that one owns to a financial company. Paying the complete amount owed to the company allows one to avoid the interest charges on the credit card. The payment of the minimum amount is the least amount of money that one can pay. If one is unable to pay the full amount. It is usually 3 percent of the total amount owed and, it leads to long-term debts. Moreover, it increases the risk of higher costs. The main reason for this is to buy time to pay the full amount.
If a person cannot pay the full amount. There is an option to pay as one pleases that is more than the minimum amount. In addition to that, one can pay off his debts by monthly installments only. If the financial company offers an installment plan. If a person owns 2000 dollars on his card, he can opt for an installment plan. The installment plan will allow him to pay $200 monthly and clear the debt owed.
The installment plan will allow him to pay $200 monthly
A part-payment prevents one from debt penalties and, high-interest charges placed the card companies to whom one owes a debt. As interest is levied on the amount owed to the issuers of the card, part payment of this amount reduces the interest charged. The greater the amount repaid, the lesser the interest is charged. The interest on credit cards is imposed daily. Making part payments frequently reduce the balance owed and the interest charges for the following billing period.
It additionally allows a user to plan his repayment date following his payday. It is weekly, monthly or, fortnightly. However, part payments do not stop from the addition of interest on the remaining amount to repay on the credit card. It means that if a person still uses the card after part payment, he will have an additional amount to repay along with a higher minimum amount and more accrued interest.
The strategies in use by credit card issuers to profit from their users
The best way of avoiding part payment is to repay the total amount by the due time. It is possible by effective financial management and planning. However, this is not always possible as complications in life are inevitable. In such times, the part payment gives time to repay the amount owed on the credit card. It is advisable to not allow such circumstances leading to partial payments. Such situations appear in times of financial crises and, part payments will add to one problem.
It is because, with each purchase made using the card after part payment, it will add to the original amount and will add more to interest. It means that a person has to repay a lot more than he spends using the care. These are the strategies in use by credit card issuers to profit from their users. The credit card companies have intentionally made these schemes to trap them in the money trap.
The credit card users keep accumulating the charges
In this way, the credit card users keep accumulating the charges by using the credit cards for daily expenditures. It is while they still own a repayment to the financial agency. It causes them to keep paying money to the bank or the financial company as the amount is too large to repay at once. The addition of interest rates also adds fuel to the fire.
One more problem related to the current scheme of partial payments is that it is unsure if there is a chance of a change in interest rates while an individual still owns the bank or the financial company. It can turn out as an advantage or a disadvantage to the credit card user. The advantage is in the sense that the interest rates of making purchases on the credit card may decrease.
It means that with every purchase, an individual will own less to the bank or financial as additional interest charges than before. For example, if a person made a purchase when the interest rates were lurking around 10% per purchase. If the purchase cost was $100, the individual would own the bank or the financial company a total of $110 due to the additional interest charges. It adds further strain on the user of the credit card. The best thing to do in such a horrible situation is to stop the use of a credit card temporarily and prevent the accumulation of additional unnecessary and unbearable costs.
A much safer alternative is to switch the method of making purchases
In such scenarios, the best solution is to cut down on purchases using a credit card. A much safer alternative is to switch the method of making purchases. Like using a debit card. The use of cash is yet another alternative when credit cards prove to be very costly. It is that is withdrawn from the bank directly or through an ATM.
However, the concept of interest rates, is also possible that becomes an advantage for credit card users. It is possible when the interest rates of making purchases fall from the previous rates of interest of making purchases. The following example is suitable to provide evaluation for this statement. If a person made a purchase that cost $100 and had an interest rate of 10%, he has to make a complete repayment to the bank or financial company of $110. Say because of change in government or change in-laws, the percentage of interest charges dropped from 10% to 8%. If the person purchases $100 then he will own to the bank or the financial company less than the previous original amount that had an interest rate of 10% and not a rate of 8%.
There a several reasons that can prove to lay an effect on the change in interest rates of the purchases made using credit cards. One reason is when there is a change in government. The new government may not approve of the interest rates of the previous government. They may think that the rates of interest are too high or too low depending upon the requirements and needs of the public. Subsequently, they decide to impose a bill to reduce or increase the rates of interest.
The government has two options it can set a fixed rate of interest.
The banks and financial companies have no choice but to stick to the rate and charge no more than that rate. Alternatively, the government can set a maximum and a minimum rate. The concept of maximum or minimum rate is that the financial companies and banks cannot charge a rate higher or lower than the maximum or minimum rate set by the government.
The financial companies or the banks with credit cards have some say in the interest rates as it is one of the main sources of their revenue generation. The companies can also increase or decrease their interest rates depending upon the cost and revenues of their companies. The main motive of the companies is to increase their profit as much as possible. But it is equally important to have a larger market share in the market.
The banks and financial companies try to increase their profits and market share or at least maintain it. The change in interest rates helps in achieving such objectives. They also utilize the changes in interest rates to help improve in the future and do better in the following year.