A credit card lets you borrow funds from a pre-approved limit to pay for your purchases. The limit is decided by the institution issuing the card based on your credit score and history. Generally, the higher the score and the better the history, the higher is the limit. The key difference between a credit card and a debit card is that when you swipe a debit card, the money gets deducted from your bank account; whereas, in the case of a credit card, the money is taken from your pre-approved limit.
Users can swipe the credit card to make a payment or use it for online transactions. After you apply for a credit card, simply make sure that the borrowed amount is repaid within the stipulated time frame to avoid penalty charges. Your credit card details are always secured with the card issuer and you should not share your credit card information with anyone to avoid fraud.
Investment guru Murali Kabirdass takes you through the benefits and shortfalls of using credit cards. Watch the video to know more.