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Further to the previous article about Credit Cards wherein basis information was shared about Credit Cards and the way they work. In this article you will the reason why Banks are called Credit Card sharks.
A credit Card is something that the Bank does not want its customers to pay on time, this is how the Bank makes loads of cash/profit. If every credit card customer utilizes the limit provided to him and pays before the due date, the Bank will not be able to continue the product for long as the Bank will be earning nothing and the fixed cost and the variable costs involved in running the product will be very high.
As not all customers will pay the complete outstanding, the people who pay are called "transactors" in Banking terminology. The people who do not pay and let the interest added to their outstanding are called "revolvers" since they keep revolving their credit card outstanding by paying minimum amount to avoid late payment charges.
Some Banks have hidden charges for these products wherein may product features and rates and not provided to customer upfront but the customer comes to know about the these charges once he receives the statement. If he checks with the Bank, he will be informed that these are covered in the terms and conditions which he signed for (a lengthy booklet in the minimum font possible).
Once the customer gets into the habbit of revolving his outstanding, he will be charged late payment charges if he does not pay on time, he will be charged interest on the total outstanding from the date of purchase. If the credit card goes over limit due to the charges levied by Banks, customers will be charged over limit fees as well.
I will be discussing more about the products offered under Credit Cards in my next article but want to advice everyone who uses a Credit Card to use it smartly and to avoid making delayed payments as few people tried their complete life to clear the Credit Card outstanding but were unable to do so as the interest keeps on piling.
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