The commencement of the electronic age has made almost everything more possible. Diagnosing and curing previously terminal diseases became widespread; travelling to uncharted territories became a possibility and above of all, people’s everyday lives was made easier by technology. We now have more convenient stores, easier means of transportation and a range of labour-saving gadgets that makes work and pleasure almost effortless.
With regard to the technology of finance, an efficient banking system and efficient services have offered people better alternatives and options with which to manage their finances. Among the so many 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 lead 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.
However, besides the glamour and the convenience that credit cards bring, there is much more to these bank cards than most people could ever think.
Credit Card 101: Before entering into the long list of the advantages and disadvantages of having a credit card, it is quite important for people to understand exactly what a credit card is, in order for them to maximize its potential.
In layman’s terms, a credit card is a device that allows a person to make purchases up to the limit set by the card issuer. One must then to pay off the balance in installments with interest. Usually, credit card repayments are per month and vary 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. Actually, most of the adults in the U.S. use credit cards on a regular basis, because it is so convenient compared with using cash or checks every time they have to buy something.
It is equally important to be cognizant of the different types of credit cards before you begin to build up credit card balances in order to avoid having a large amount of debt. Since credit cards are indispensable to most of their users, it is a must that they understand the types of card that include charge cards, bankcards, retail cards, gold cards and secured cards. All of these kinds of cards come with one or two interest rate options: fixed and variable rates.
If you decide to have a fixed-rate credit card, the interest rate remains the same, compared with variable rate cards where the rate is subject to vary depending on the credit card issuer’s discretion. Fixed-rate cards often 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 back the complete balance every month so that they don’t have to pay any 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 payments over definite 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 an idea of how many kinds of credit cards there are, it is time to review your goals before applying for one. Some of the things you should think about is how you will use the credit card. If you plan 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 some understanding of what you need, select the right credit card for you by looking for the information you need. You may also review the credit cards you’ve researched and make a comparison.
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 understand the benefits of having a credit card like safety, valuable consumer protections under the law, and the accessibility and availability of services.
Although having a credit card is thought of as being 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 bearer should always bear in mind that having a credit card is a big responsibility. If they don’t use it responsibly, these may end up owing more than they can afford to repay. It can also damage their credit status report, and create credit repair problems that are quite difficult to put right.