Exclusively for Caucasus Business week, pieces of advice from TBC Bank’s regional director Levan Diasamidze.
What is a credit card and how is it different from a debit plastic card?
A plastic card is an inseparable part of modern banking system. It enables us to make payments for products or service in almost any country of the world, and it enables us to encash or convert money.
There are two main types of plastic cards: debit and credit cards.
The major difference between a credit card and a debit card is that, in the case of a credit card, the bank allows a cardholder a simple access a loan through a preapproved credit limit. With a debit card, a cardholder can only use the amount available on his or her account.
How much is the annual card fee and when is it due?
Almost all types of cards have annual service fees (except cases when a bank eliminates the fee as part of a special offer).
The annual fee is paid in advance or once a year. The size of the fee depends on the card type (Electron, Classic, Gold, etc.). Consequently, it is important to obtain a card that best suits a consumers needs; the right decision will help economize on the annual fee.
It is also important to know that, in addition to an annual service fee, credit card users also pay encashment fee, which differs from bank to bank.
What is the grace period of credit card and can card holders receive “free” credit?
There are numerous credit cards on the banking market and they all differ from each other, offering a variety of credit limits, interest rates, grace periods, etc.
In fact, if we choose and use a credit card properly, we can actually benefit from the free credit limit. For example, there is card on the market that offers a one-time, three-month grace period, followed by a 55-day permanent grace period. This implies that we can use the credit amount free of charge for three months making a purchase or seeking a cash advance.
After this period, we can benefit from the grace period –55 days after using the credit card. If you repay the credit during these 55 days, you will not be charged any interest. After repayment, you can spend the credit again and repay it within 55 days.
What is a payment date?
A payment date is set on the day the credit limit was approved. For example, if your credit limit was approved on the 15th of a month, you will have to pay the interest and the principal on 15th of every month. To be more precise, if you purchased some item on 10th, you will be charged five days of interest on the amount spent – from the 10th to 15th of a month, if the grace period is over.
How much do I have to pay each month and how is the minimum payment calculated?
After the 55- day grace period is over, we have to pay interest on the amount spent, as well as the principal spent. The amount to be paid is calculated according to the number of days the credit was used.
What advice do you give to customers?
Plastic cards have become an inseparable parts of our lives, so it is important to understand them and use them effectively.
My advice is to learn all conditions related to the usage of the card in detail before signing up for it, and make a decision on which type of a card to sign up for only after diligent research. I would advise clients not to to base the decision on the color or prestige of the card, since the most important factor should be whether it suits your needs and how convenient it is.