A credit card is a secure and convenient way to make everyday purchases or withdraw cash, up to the credit limit. A credit card is easy to carry and safer than cash. If it is lost or stolen, the customer can cancel the card and get a replacement at low cost. Some cards come with lifestyle privileges and exclusive rewards.
The cardholders make the individual purchases now and pay the total bill later on the next statement date. The monthly statement provides cardholders an opportunity to review past purchases and report to the issuing bank any discrepancy.
After the bill statement is issued, cardholders have a number of days, called the grace period, during which they can pay off the balance free of interest. So long as customers pay off the bill on time, the customers can avoid paying interest and late fee. It is like an interest-free loan for the duration of the grace period.
After the grace period ends, cardholders must pay a minimum of the outstanding bill. Failure to pay the minimum will incur a late charge. Remaining outstanding bill is subject to an interest charge that accrues daily until it is paid off.