Credit Cards: Why do banks offer so many credit cards? How do they earn money? Learn all the details here.

Credit Cards: Banks generally sell more and more credit cards. In today’s economic world, many people use them. This raises the question of why banks are so keen on offering credit cards and how they earn money from credit cards.

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Credit Card: Credit card usage is increasing these days. Card payments offer numerous offers, discounts, and reward points, but you’ll only reap the benefits if you use them wisely. In malls and shopping centers, you’ll often see people approaching you for credit cards. Furthermore, you frequently receive calls about credit cards. Why do banks contact customers about credit cards? Why are people often urged to apply by listing its benefits? What benefit does this offer to the bank?

In fact, the number of credit card users is increasing rapidly every year . This has become a vital source of revenue for banks. Therefore, issuing credit cards is as beneficial for the bank as it is for the card user. The main sources of revenue for banks from credit cards include merchant fees, interest amounts, marketing-tie-up fees, and other charges.

Credit card interest rates

Credit card interest or finance charges are fees charged by banks for lending money. Also known as the annual percentage rate (APR), they’re calculated as a percentage of the total amount borrowed.

Rapidly growing credit card business

The use of credit cards is rapidly increasing in India. Banks offer various offers on these cards. A credit card allows users to purchase anything on credit from anywhere in the market. Payments are made within approximately 45 days. Cashback and rewards are also available for timely payments. This not only benefits the user but also the bank.

How do banks earn from credit cards?

Credit cards are a business model for banks. They generate profits from interest rates and other charges. Often, if interest is not paid on time, interest of 15-40% is charged on the outstanding payment. Furthermore, annual renewal fees, late payment fees, interchange fees, cash advance fees, balance transfer fees, and EMI conversion fees also generate significant revenue for banks. This is why banks focus on increasing customer numbers and consumer spending.

Know what a credit card is

A credit card is a plastic card similar to a debit card ( ATM card). A debit card allows us to withdraw funds from our bank account. A credit card, on the other hand, allows us to borrow money from a bank or NBFC to make purchases. Each month, we receive a bill for credit card expenses, which must be paid by a certain date. If payment is not made, interest is charged on the remaining balance.

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