Credit Card Facts and Repair

Credit Cards. Be warned Does the credit card work for you or do you work for your credit card? Most people's answer to that question will depend on how they treat their "old plastic" as credit cards are known. For many with burned fingers will tell you they didn't realize that things had gotten so bad until very late, because most credit card offers try much to sound like they are actually running a charity. Well, they aren't. And this is not a hate campaign against credit cards. Surely they have their benefits - in America if you want to rent a car, you got to have a (major) credit card. But, consider this scenario You receive an offer in your mail that sounds good, maybe it's a new generation TV or a fridge. But it costs $2000. Oh, but you have a credit card with a $5000 limit, and you immediately purchase your merchandise. Typically, here is how your repayment schedule will play out. Most credit cards charge a minimum of total balance (usually 2 percent) of the total per month. Assuming the interest rate is 18 percent and you choose to repay the minimum amount of $40, $30 of that will go towards interest and only 10 percent towards the principle. As a result, you will take 30 years to repay and end up paying over $5000 interest. Sounds scary. It doesn't have to be. The moral of the illustration is Use the credit card the same way porcupines make love; very, very carefully.

Types of Credit Cards Credit cards are ubiquitous in our lives. There are three main types of credit cards that are common in America. They are travel and entertainment cards such as American Express or Diners Card. These have to be paid in full at the end of the month and are liberal on spending limits. The second major cards are the bank cards such as Master Cards, Visa, GM, and Ford cards sponsored mainly by the banks. The bank defines spending limits, which in the bank parlance, is known as the credit lines, and each offers different terms and conditions. Banks offer a choice of payment methods, either pay the balance in full with no interest or pay a minimum part or some part of the balance with a finance charge. The other major type of card is the retail store cards such as Sears, J.C. Penney, Shell or Mobil. These cards, known in some countries (the ones from gas companies) as fuel cards are only accepted in specific countries and usually do not have annual fees. There is a wide disparity in the terms and conditions for the cards. Different types of credit cards offer several different options, depending on what your needs are. Some are geared toward individual consumers, while others are set up in ways that work best for small business needs. To know what type of credit card fits your needs, you should review a few of your options.

Advantages of a Credit Card The Chinese are credited with coming up with numerous inventions including gunpowder, umbrellas, chopsticks, paper and paper money. Lamentably, (from Chinese point of view) the honors of coming up with plastic money went with early American capitalists. From the time John Biggins, the inventor of a first bank issued card, had his first eureka moment in 1946, credit cards have evolved to become one of the most versatile ways of paying, and this is why. Once issued with one, the need to carry around unsafe, dirty and bulky cash is significantly diminished. I say diminished because some small scale merchants (who perhaps are scared of technology) will still insist on being paid in cash. Further, credit cards enables you to build up a credit history, but only if you always pay on time. In some countries such as UK, if you buy goods using a credit card and the goods turn out to be faulty, they are usually insured for a period of time, say two months, and you can be indemnified even for total loss. Credit cards are safe, and even if gun-toting miscreants help themselves to your wallet, you can make hit back by simply calling the credit card company and canceling the stolen card. Another thing going for credit cards is that you can keep track of your transactions, and it's thus easy to keep track of your expenditure. I could go on and on, and whatever the doomsday prophets say, plastic money is here to stay.

How to choose a Credit Card Credit cards have become a part of life for most people living in the western countries. It's becoming increasingly impossible to avoid them, especially for business men. So if it is the first time you are seeking to enter into the world of plastic money, here are some of the basic things you should look out for. First, compare the interest chargeable for all the credit cards for which you are eligible. While the rate may not remain fixed indefinitely, it's always advisable for first timers to go for the one charging lower rates. Read the fine print, especially on the other charges that may be charged on you, like late-payment fees, annual fees, and whether there is a grace period which is normally given before the finance charges kick in. Decide what limit is appropriate for a person of your income. Also the fewer credit cards you have, the better placed you are to track your spending. Compare the services and other features such as the cash back incentives, or warranties, rebates and the like. Check whether the card is widely accepted to enable you to pay for your needs. You will do yourself a favor by familiarizing yourself with the following terms. Annual Percentage Rate. This is the measure of the yearly cost of credit. Finance Charges. These are the total charges involving the transaction. This is the period the issuer gives you before he starts charging you interest on new purchases. Note that not all credit cards have a grace period.

Credit Card Do's and Don'ts There is a lot of truth in the advice that credit cards are not a substitute for not having money. Every time you use a credit card this should be the theme replaying in your mind. And you would do good to remember the following too.

Do's. Always plan for the purchases that you need and those that you want. You need the essentials, and you want everything else. The ability of making a distinction might help you plan wisely. If caught up in financial difficulties, it's always good to talk to the issuer who might re-schedule your payments. If you simply default, that only helps to build up an unfavorable credit history and you might find yourself being denied credit next time. Unless it is an emergency, staying within your credit limits will help you a great deal. If you must spend over the limit, ensure you are within the manageable levels, say within 30 percent. And if your mails are flushed with more favorite deals than you currently are enjoying, you may approach your issuer for a better deal. They want to retain you as their customer, so they will listen.

Don'ts Do not use your credit card to make house hold purchases. It's expensive in the long run Do not just pay the minimal amount. You will end up paying exorbitant interest. The quicker you clear the debt the better. Do not use the credit card to purchase things you can't afford.