A credit card is a form of payment for services or products that has a predefined credit limit. Understand how it works. “Debit or on credit?” is one of the most frequent questions in commercial establishments in Brazil.
Even though it is so popular, the credit card can leave its users with doubts, especially regarding interest rates, revolving credit and redemption of miles.
What is a credit card?
A credit card is a form of payment for services or products with a predefined credit limit. That is, it is a kind of loan granted by a financial or payment institution responsible for issuing the card.
Every credit card has a brand – for example, Visa, Mastercard or American Express – whose purpose is to mediate transactions between the consumer and the issuing institution. While it manages the operations and establishes the limit for credit card purchases and maintenance fees, in addition to sending the invoice to the consumer, the brand manages the technologies involved in the transactions, from machines for payment with a physical card to accreditation of establishments.
This method of payment can be requested by individuals or legal entities and can also be national, that is, accepted only in the consumer’s country of residence or internationally when it is also used abroad.
How to make a credit card?
Applying for a credit card is a relatively simple procedure. Those who wish to apply need to look for an institution that issues cards, such as a bank, a fintech or a payment intermediary. Nowadays, requests can be made online through the issuing company’s website.
It is worth remembering that it is optional to have a current account at a bank to make the request. However, the operator requests some documents for analysis that may vary according to each institution.
In general, the requested documents are an identity card, CPF, proof of residence, and proof of income. The requested documents will be used to analyse the consumer’s profile and define the limit for the credit card, considering that the card functions as a loan granted by a financial institution.
After registering, it undergoes analysis, and the request is approved if there is no restriction on the CPF. With this, the physical card is sent by mail to the address indicated in the application. In some cases, the card can also be withdrawn at bank branches.
How does a credit card work?
A credit card works like any financial transaction where two parties make an agreement. The two parties, in this case, are 1) the card issuing company and 2) the card applicant. The issuing company establishes a credit limit that the card applicant can use to pay for purchases and services. The latter, in turn, undertakes to pay the amount of credit used on the invoice’s due date.
The analysis criteria for granting this limit varies from institution to institution, but, in general, it considers the applicant’s financial profile.
If there are purchases in instalments, the total limit is released only after each instalment payment. To illustrate: the holder of a credit card with a limit of R$ 2,000 buys a cell phone worth R$ 1,000, paid in 5 instalments of R$ 200 each. There remains, therefore, a limit of R$ 1,000 to be spent in the month of purchase of the cell phone. After paying the invoice with the first instalment, the remaining BRL 800 will be “blocked” for new expenses. Thus, in the month following the purchase of the cell phone, the holder will have a credit limit of R$ 1,200 for new purchases. If at the end of this month, the consumer does not make any other purchases in instalments when paying the invoice, with the second instalment of R$ 200, the consumer will have a spending limit of R$ 1,400 for expenses in the next month.
Best Purchase Date: What Does It Mean?
Credit card purchases can sometimes be paid within 40 days of purchase. Often, this happens because expenditures made between five and ten days before the invoice due date are carried over to the following month. Some financial institutions inform consumers that this would be the “best date to buy” because by carrying out transactions on that date, the cardholder would only receive the charge 40 days later.
To exemplify, let’s think that the final date for payment of the card is on the 30th, and the closing of the invoice takes place on the 20th. In this case, a purchase made on the 19th will be charged on the first invoice due on the 30th of that same day. Month. On the other hand, if the purchase is made on the 21st, the payment will remain on the invoice to be paid on the 30th of the following month.
Not infrequently, the card operator charges an annuity fee, the amount of which is detailed on the invoice. The annuity exists under the justification of covering expenses such as managing and monitoring the card. The payment of this fee can be made annually or divided into monthly instalments. The value varies from institution to institution, and there are those that offer gratuities or discounts to get new customers or retain old ones. It is also possible to negotiate the value of the annuity or even claim the exemption. The more credit card purchases and the more relationship with the card issuing institution, the greater the chances of being able to lower the annuity. But there are already new operators in the market that offer cards with no annual fee for their customers.