The emergence of the electronic age made nearly everything possible. Diagnosing and curing previously deadly illnesses became widespread; reaching uncharted territories became a possibility and most of all, people’s everyday lives was made simpler by technology. We now have more convenient stores, simpler means of transportation and a variety of gadgets that makes work and pleasure nearly effortless.
With regard to the technology of finance, an efficient banking system and efficient services have given people better alternatives and options with which to manage their finances. Among the various financial management tools that emerged, one stands out head and shoulders above the rest – the credit card.
Credit cards, especially to working people and those who live very busy lives, have become the ultimate financial saviour. More than just being a status symbol or an accoutrement to expensive purses and wallets, credit cards have revolutionized the way people spend their money.
But, more than the glamour and the convenience credit cards bring, there is much more to these bank cards than most people could ever imagine.
Credit Card 101: Before entering into the never-ending list of the advantages and disadvantages of having credit cards, it is very vital for people to have a brief understanding of what a credit card really is, in order for them to maximize its potential.
In simple terms, a credit card is a device that allows a person to make buys up to the limit set by the card issuer. One must then pay off the balance in installments with interest. Usually, credit card payments are monthly and range from the minimum amount set by the bank to the entire outstanding balance. And since it is a form of business, the longer the credit card holder waits to pay off his or her entire amount, the more interest piles up.
Since having a credit card is a responsibility, only those people who are of legal age and have the ability to pay off the amount they are going to spend through their credit card, is allowed to have one. Really, most of the adults in the U.S. use credit cards on a regular basis, because it is very convenient compared to using cash or cheques every time they have to buy something.
It is equally vital to be cognizant of the different types of credit cards before you start to build up credit card balances in order to avoid having a nightmare of debt. Since credit cards are indispensable to most consumers, it is a must that they know the types of card that include charge cards, bankcards, retail cards, gold cards and secured cards. All of these types come in one of two interest rate options: fixed and variable.
If you choose to have a fixed-rate credit card, the interest rate remains the same, compared to variable rate cards where the rate is subject to change depending on the credit card issuer’s discretion. Fixed-rate cards usually carry higher interest rates.
Basically, credit card suppliers usually offer three types of accounts with basic account agreements such as the ‘revolving agreement’ also called the ‘Typical Credit Card Account’ which allows the user to pay either in full monthly or prefer to have partial payments based on the outstanding balance.
While the Charge Agreement requires the payer to pay the full balance every month so they won’t have to pay any interest charges. The Installment Agreement, on the other hand, questions the payer to sign a contract to repay a fixed amount of credit in equal payments over certain periods of time.
Another category of credit card account includes the individual and joint accounts where the former requires the individual alone to repay the debt and the latter requires the partners to pay together.
Now that you have some thought of how many kinds of credit cards there exist, it is time to review your goals before applying for one. Some of the facts you should reckon about is how you will use the credit card. If you plot to carry a balance at the end of the month, how much are you willing to pay in annual fees, if you have a strong credit history and if your credit in need of repair.
Once you have a reasonable thought of what you are looking for choose the right credit card for you by looking for the information you need. You may also review the credit cards you’ve researched and compare them.
Are you shopping for a credit card? Regardless of the type of credit card you choose, be sure to discuss your specific financial requirements with your financial advisor or accountant before applying for any credit card. It is a must that you know the benefits of using a credit card like safety, valuable consumer protections under the law, support and the accessibility and availability of services.
Although having a credit card is considered synonymous with financial security, this may also trigger a person’s thirst for material things and may lead to the temptation to buy something they don’t really need. A credit card holder should always have in mind that having a credit card is a huge responsibility. If they don’t use it carefully, these may owe more than they can repay. It can also hurt their credit status report, and make credit repair problems that are quite hard to place right.