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How do credit cards work and what are the benefits of using them?

Have you ever been in line at a store to purchase something and did not have enough cash to buy the item? We can all relate to this scenario. However, now with the use of credit cards, people often times do not have to worry about not having enough cash anymore.

What are credit cards?

Definition A credit card is something which everyone has or at least have used before. It allows a person to purchase items or services by borrowing from a line of credit with the credit card company. Once a consumer makes a purchase by using a credit card, he is required to make monthly payments on the balance until the outstanding balance is paid in full. The use of major credit cards has been so important to consumers, whether they are renting a car, or a hotel room, or just not having any cash on them and they need to purchase something important. We have all used them, and many of us cannot live without them.
How do credit cards work?
Once a consumer has been approved for a credit card, he is then given a certain amount for a line of credit which he can use to make purchases or receive a cash advance from. Using a credit card is similar to getting a loan from a bank, because when a consumer makes a purchase using a credit card, the store will give the credit card company proof of the purchase, and then the credit card company pays the store on behalf of the consumer. The credit card company then sends out a bill to the consumer for the reimbursement of the purchase.

What are the benefits of credit cards?

Convenience Using credit cards is a very convenient way of shopping. It eliminates the hassle of going to the bank for cash, or even writing a cheque and then having to balance the cheque book later. Making a purchase with a credit card consist of just swiping the card at check-out, and signing a receipt, no more digging through a purse for loose change. Improves credit score A lot of people think of their credit report as a report card for their credit cards, because a person’s credit report and score is connected to their credit card usage. If a person is a responsible credit card user, it will be reflected on the credit history of hsi credit report, and it will help to increase his score and show many lenders how creditworthy he is.

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