Interest on credit cards is the main ingredient which generates revenue for the bank which issues the credit card to the consumer.
The credit card helps the consumer to make purchases or pay bills even if he does not have money in his account.
So, it's like borrowing money from the bank to pay bills and make purchases.
The bank on the other hand charges interest for money borrowed till the time the card consumer pays back the money.
So, it is very important for the bank to have detailed information about the consumer or customer to whom the bank will issue the credit card.
So, for the case of interest free cards in what way the bank earns revenue.
So, let us first understand what interest-free credit cards are.
What do you mean by interest-free credit cards? Interest-free credit cards are those cards which do not charge any interest from the borrower from a certain period of time, which varies from bank to bank and also from card to card.
After that period is over the card functions like and other cards on offer with an interest to be paid.
So, what makes credit companies offer such interest-free cards to consumers? It is done generally to get business.
A person who usually has high amount to be paid in his credit card bills which charges high interest rate will always try to shift that money to the interest-free card, which helps him to buy some time still he pays the borrowed money back.
Secondly, a person owning an interest-free card will be tempted to make frequent purchases in the belief that he will pay the money within the interest-free time limit which makes him most of the time make purchases beyond his pocket will permit.
Thus, the interest-free cards play tricks with the mind of the consumer.
So, how does a consumer can get benefit from interest free credit cards? Let's say, you are a salaried person who gets his salary on the 5th of every month, unfortunately, in particular month you lose your mobile phone.
A mobile is an indispensable thing which you cannot do without, but all your money or savings are locked up in some or the other investments and it is 25th the month.
So, what do you do? You can use your card and purchase the mobile and pay back when you get the salary next month.
So, it comes out as a very handy weapon for any unforeseen emergency expenses which you never though you would incur.
Not only for unhappy situations but also for happy occasions like say a sale happening with discounts, which if you wait for your next salary it will be gone, so you can use one of your interest-free cards and make those purchases, and of course, if you have good credit history you can take multiple interest free cards and enjoy your life.
Sometimes, you can use one of your interest free cards and make payment to another of your interest free credit cards which if done wisely and timely will help you to incur interest free purchases.
But, keep a tab on your purchases and the interest which they charge if the time period is over.