Banks Gaining Supernatural Profits from Credit Card Debts

A bank is a financial institution which deals in money and credit. It acts as a channel which handles other’s money both for their advantage and earning profits. Banks are highly governed in most countries due to the influential status within the financial system and upon national economies.

The standard activities of bank are it accepts money from public and deposits them in their current or saving accounts and lend money by making advances to customers on current accounts, by investing in marketable debt securities and other forms of money lending and by making installment loans.

One of the most standard activity that bank performs is lending credit card facilities and make the bulk of their money from net interest margins. Each time credit card is swapped it generates interchange revenue in the form of swipe fees. The interchange interest rate depends on what type of card is used and these cards are often in the range of 1 to 3 percent interest.

Lots of banks are issuing credit cards and within 45 days the holder of card will have to pay the amount to the bank. The bank charges the vendor between 1 to 3% of the purchase to be able to accept their card. Some people are late with payments or charge over their credit limit, and the banks make big fees for these actions.

Due to credit card some of the customers become insolvent because they are indebted and fail to pay the bill. Customers can only avoid the credit trap if they understand the interest rate, by paying the minimum due amount and by making monthly payment in full. If you have a heavy credit card debt, get it converted into a personal loan and pay it off as EMIs.

Many a times bank offers multiple cards but try to avoid it because if you are not using the second card then also bank may levy an annual service charge or “membership fee”. Therefore just one card is enough to take care of your needs.

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