Credit Card 101

 

The rise of the electronic age made almost everything possible for people.

Determining and curing terminal illnesses became convenient, reaching unexplored territories became a possibility, and above all; Technology makes everyday life easier for people.

We now have more convenient stores, easier means of transportation, and a variety of devices that make work and pleasure almost effortless.

When it comes to finances, technology, through an efficient banking system and services, has provided people with better alternatives and options to manage their finances.

Among the many financial management schemes that have emerged, one alternative stands out among the others: the credit card.

The credit card, especially for workers and those who live busy lives, has become a definite financial "savior."

More than being a status symbol or a complement to expensive purses and wallets, the credit card has revolutionized the way people spend their money.

But, more than the glamor and convenience that the credit card provides, there is much more to this card than most people could imagine.

Credit Card 101

Before getting too deeply into the endless list of advantages and disadvantages of having a credit card, it is very important that people first briefly realize what a credit card really is so that they can maximize its potential.

In simple terms, the credit card is a card that allows a person to make purchases up to the limit set by the card issuer.

Then, the balance must be settled in installments with interest payments. Generally, the credit card payment per month ranges from the minimum amount set by the bank to the total outstanding balance.

And since it is a form of business, the longer the credit card holder waits to pay his full amount, the more interest accrues.

Since having a credit card is a responsibility, only those people who are of legal age and have the ability to pay the amount they are going to spend through their credit card, can have one.

In reality, most adults in the US use credit cards because it is so convenient compared to carrying cash or checks every time they have to buy something.

It's also equally important to be familiar with the different types of credit cards before you start accumulating credit card balances and avoid having a debt nightmare.

Since credit cards are a must-have for most consumers, it is imperative that they understand the types of cards that include credit cards, bank cards, retail cards, gold cards, and secured cards. All of these types come in one of two interest rate options: fixed and variable.

It doesn't really matter if you decide to have a fixed rate credit card because the interest rate remains the same.

Compared to variable rate cards where the rate may be subject to change at the discretion of the credit card issuer, fixed rate carries higher interest rates. 

Basically, credit card grantors issue three types of accounts with basic account agreements such as the "revolving agreement", also known as a typical credit card account that allows the payer to pay the entire month or prefers to have partial payments based On the outstanding balance.

While the Charge Agreement requires the payer to pay the balance in full on a monthly basis so that you do not have to pay interest charges, the Installment Agreement, on the other hand, asks the payer to sign a contract to repay a fixed amount. of credit in equal amount. payments in a defined term.

Another category of credit card accounts includes individual and joint accounts, where the former asks the individual alone to pay the debt, while the latter requires the responsible partners to pay.

Common types of credit cards available through banks and other financial institutions also include standard credit cards such as balance transfer credit cards and low-interest credit cards;

Credit cards with rewards programs, such as airline miles credit cards, cash-back credit cards, and rewards credit cards; Bad credit credit cards such as secured credit cards and prepaid debit cards; and specialized credit cards such as business credit cards and student credit cards.

Now that you have an idea of ​​how many types of credit cards there are, it's time to review your goals before applying for one.

Some of the things to consider are how you will spend with the credit card on a monthly basis, if you plan to maintain a balance at the end of the month, how much you are willing to pay in annual fees, if you have a strong credit history and have your credit in need of rehabilitation . 

Once you have an idea of ​​what you are looking for, choose the right credit card for you by researching the information you need to meet your basic needs. You can also review the credit cards you have researched and compare them.

Looking for a credit card?

Regardless of the type of credit card you choose, be sure to discuss your specific financial needs with your financial advisor or accountant before applying for any credit card.

It is imperative that you understand the benefits of having a credit card, such as security, valuable consumer protections under the law, and the accessibility and availability of services. 

Popular credit cards include Chase Manhattan Bank, Citibank, Bank of America, BankOne, American Express, Discover® Card, First Premier Bank, Advanta, HSBC Bank, and MasterCard Credit Cards.

Although having a credit card is synonymous with invincibility, this can also trigger a person's thirst for material things and can lead to the temptation to buy something that they don't really need.

The holder of a credit card should always keep in mind that having a credit card is a great responsibility.

 If they don't use it carefully, they may owe more than they can return. It can also damage your credit report and create credit problems that are quite difficult to repair.