Credit Card Benefits and Drawbacks

Credit cards have got both benefits and drawbacks. It is wise to see both before applying for a credit card. While they can be very useful, credit cards can also be risky. Even people who are usually good with their money get into problem with credit cards. A credit card can be useful, but may also stop up putting you in a hard financial state of affairs if misused.

Here are some of the benefits of credit cards:

Withdraw cash 24 hours a day, anywhere in the world.

Buy online. It is the quickest and easiest way, and you are protected against credit card fraud.

Repay in regular instalments. Typically, these incur interest.

Usually, there is an interest-free repayment period, which you can utilize to refund your debt in full, interest-free.

One of the chief benefits of using a credit card rather than a debit entry card is the protection provided by the Consumer Credit Act. This states that if you have got got problems with commodity or services you can get your money back from the card issuer if you can't get it back from the supplier.

Some cards supply purchase protection insurance, which pays out if something you have bought with the card is lost, damaged, or purloined within ninety years of the day of the calendar month of purchase.

A credit card can cost nil - if you pick a card that doesn't charge an annual fee and you always pay the measure in full every month.

A credit card can salvage you money if you take one that earns you cash every clip you purchase something. How much cash you get back is calculated as a small percentage of the amount you have got spent on the card. Some cards offer inducements other than cash - Air Miles or shopping vouchers, for instance.

Even if you make not pay your monthly measure in full, a credit card can be cheaper than running an overdraft on your current account, especially if your bank charges a monthly fee as well as interest when you overdraw.

Using a credit card can work out cheaper than using traveller's checks or foreign currency to pay for things abroad. This is because the exchange rate used by card companies to convert foreign disbursement into sterling is better than normal tourer rates. However, because of credit card charges for cash withdrawals, a debit entry card is better if you desire to utilize plastic to purchase currency, whether over the counter or from a foreign cash-machine.

You can give to charity for free if you subscribe up for a charity credit card.

Credit cards are often cheaper than loans for short-term borrowing. You pay interest on the remaining debt, not the full amount - and there are no early salvation penalties.

Credit cards offer flexibleness to fit uneven income and outgo patterns: you take what to pay off each month, between the minimum and the sum outstanding.

Their consolidated accounting enables one check to settle down multiple transactions – while all look neatly on one pre-prepared statement each month.

There is an automatic ‘interest free' time time period per statement period.

Credit cards enable distant buying via the internet, by telephone or mail order.

Credit cards can include further benefits like insurance screen on purchases, cash-back, AirMiles, Nectar or Reward points, and holiday discounts.

Here are some of the drawbacks of using a credit card:

Credit cards can be unnecessarily costly.

Credit cards may be expensive for cash withdrawals

Credit cards may be expensive for foreign currency purchases.

Their credit bounds can be deficient for your requirements.

They encourage a ‘pay now, concern later' outlook and do it too easy to get into debt.

Credit cards are very unfastened to fraudulent use.

You may freely reissue this article provided the author's life stays intact:

History of Credit Cards

Credit Cards have got go an absolute necessity so much so that we take them for granted. A number of money experts have got already slated the paper currency as a dying dinosaur. But have got you ever wondered where did this plastic money of credit card come up from? Whose genius was it anyways?

Though the thought of “have now, wage later” existed since the 1700s but it was only in the early 20th century that the banks started taking credit protection in word form of overdrafts. In 1914 Western Union gave its clients a metallic element card allowing them interest free recess payments. This gave their clients a freedom to pass beyond their means. However, the thought of existent credit card did not hit ‘father of Credit Cards’, Frank McNamara until he forgot his wallet back home while going out for a dinner with friends.

This awkward minute was just too much for McNamara. Thus, he created the “Diner’s baseball club card”. It was initially a businessmen’s card for dinners and retails purchases while traveling but by the end of 1950 it had go a phenomenon. A national craze that began with just 200 clients who could utilize it in 27 restaurants, it swelled to such as monolithic size that it distribute over the whole USA with 20000 clients and more than varied sorts of retail merchants subscribed to it as credit providers. The Diners card charged seven percent for each individual transaction with card endorsers paying a three-dollar annual fee. Stores and service companies readily extended this facility. They could profit from it since the clients spent more than than they would if they had to pay the cash up frontally.

The General Petroleum Corporation was one of the first companies to offer an existent credit card that allowed for combustible and automotive repair purchases to its employees. They could utilize their card and do payments towards these things with parts of their paychecks.

The monopoly of Diner’s baseball club was short lived. McNamara withdrew his share of money from the company in 1952. Very soon American Express launched its similar yet more than generalized credit card and Bank of America came out with BankAmericard (now called VISA) in 1958. Master card came up in 1966. These new market participants overpowered the old titan.

While McNamara created credit cards, Toilet Biggins is acknowledged as the discoverer of the bank credit card. He worked at the Flatbush National Bank of Brooklyn in New York. In 1946, Mr. Biggins developed the "Charge-It" program in which local merchants who accepted the card would lodge sales steals into the bank and the bank billed the customer.

What You Need To Know About Credit Cards

What is a credit card?

A credit card is a card that allows you to borrow money to pay for things. There will be a limit to how much you can spend called your credit limit. At the end of each month you can either pay off the whole of the amount you owe or make a minimum repayment.

Other kinds of cards include:

1) A cheque guarantee card, issued by your bank, that you can use to ensure that your cheque will be honoured up to a certain limit. 2) A chargecard where you have to repay the full amount at the end of each month. 3) A debit card, issued by your bank, where whatever you spend is immediately deducted from your bank account

Do you need a credit card?

Using a credit card is a useful way of making purchases:

a) A credit card means you don't need to carry huge amounts of cash around and risk losing it. b) A credit card means you can buy items over the internet. c) A credit card means you can make purchases abroad without having to worry about local currency. d) A credit card gives the opportunity to spread the cost of a large payment over several months. e) A credit card is useful in an emergency. For example, an unexpected repair to your house or car.

How do you choose a credit card?

The main two UK credit card issuers are Visa and Mastercard. These are accepted in most places and in 130 countries worldwide. Beware of less well known brands that may not be accepted everywhere.

Before you choose which credit card is the best for you, remember to read the terms and conditions carefully. Never sign up for a credit card without fully understanding what you are agreeing to.

Remember that all the plus factors will be prominently displayed in large print.

You may have to study the small print carefully to discover if there are any negative factors.A list of the current cards on offer in summary is available on this credit card summary page.

What You Need To Consider:

1) APR (Annual Percentage Rate) This is the rate of interest that you will pay on any outstanding balance.

2) Special Introductory Rates You may be offered a low or 0% rate of interest for a limited time (Up to 6 months) when you sign up for a new card. A higher rate of interest may be charged for cash withdrawals.

3) Balance Transfer Rate Card issuers may offer you a lower rate of interest if your swap your balance from another credit card to theirs.

4) Interest Free period Remember to check when interest payments will begin. Will you pay interest from the day of the purchase? Or will you have a number of days interest free before you begin to pay? There is usually no interest free period for cash withdrawals.

5) Cashback and Rewards Some cards over points or rewards for every pound spent on the credit card. Make sure that these are appropriate for you. For example, there&'s no use collecting airmiles if you never fly.

6) Minimum Repayment Remember to check what the minimum monthly repayment will be. If you borrow £1000 on your credit card the monthly minimum repayment will probably be in the region of £25. But if you only pay this amount each month it will take a long time to pay off the balance and cost a lot in total when you include the interest payments.

7) Annual Fees This is the fee that the issuer will charge you every year for using their credit card. Not all credit cards have an annual fee, so remember to consider this when you are choosing which one is right for you.

8) Late Payments There will be an extra charge, as well as the interest owed, if your payment is late. This charge may even be more than the amount you owe so be very careful to check what the charge is, and to ensure that all your payments are made on time. A good way of doing this is to set up a direct debit from your current account.

9) Exceeding Your Limit You may also be charged a fee if you exceed your credit limit.

Will Your Application Be Accepted?

Whether or not your application is successful will depend on your credit rating. Your credit rating depends on your credit history (a record of your use of credit) and is based on the record of your ability to repay debt.

You can obtain a copy of your credit file by contacting a credit reference agency. There may be a small fee for this service.

When you application has been accepted you will be given a credit limit. The credit limit will be fixed when you first apply for your card (although you can ask for it to be increased or decreased later) and the limit, including the amount you have left available to spend, will be shown on your monthly statement.

Insurances and Protection.

What You Can Do:

1) Take good care of your credit card to ensure that it isn’t lost or stolen.

2) To prevent misuse of your card you must report any loss or theft of your card to the issuer immediately. Many issuers allow you to register all your cards with them so that in the event of you losing a purse, handbag or wallet they can all be cancelled with just one phone call.

3) You must keep all your receipts and also check your statement carefully and report any suspicious transactions. For example payments that you have no record of making.

4) Credit card companies are now issuing cards with PIN (Personal identification numbers) which are known as Chip and PIN cards. Rather than signing your name you will be asked to enter your PIN onto a keypad. You must ensure that you keep this number secret.

What The Issuer Will Do

1) The issuer should insure you against loss, misuse or theft of your card.

2) The issuer may also insure your purchases for up to 100 days.

3) Your issuer may also provide protection against you being sold unsuitable or shoddy goods.

Important Points To Remember:

a) Credit cards can be a very useful tool to help you to manage your finances. b) Choose your card carefully, remembering to read and understand all the terms and conditions before you sign up. c) Remember to set yourself a budget and decide how much you will pay off each month. d) Check your statements carefully each month. e) Look after your card to prevent it being lost or stolen.

For a glossary of the terms mentioned in this article please visit the credit card glossary page.

Teaching Responsible Credit Card Use

It's an unfortunate fact that most students never get formal lessons in managing their credit and debt. For many young people, their first brush with being responsible credit card users won't come till they are in college - away from home and the guidance of mom and dad. The moment they step on campus, new college students will be wooed by major credit card companies, all of them eager to establish themselves as 'the first card in your wallet'.

If your child will be going off to college in the fall, one of the best things you can do for him or her is to get them started on the right foot to handling credit responsibly. Needless to say, example is the best way to teach. The more responsibly you handle your own credit card use, the more likely it is that they'll absorb your attitudes toward the use of credit cards.

Beyond that, though, one of the easiest ways to teach responsible credit card use is to cosign an application for one of the credit cards that is especially designed for student use - and do it before they're off on their own. Each major credit card line features at least one credit card that has low credit limits ($500 to $1000), no annual fee and a moderate APR.

Make a big deal about applying for the credit card. Explain to them that each credit card application they fill out will be noted on their credit report - high school students especially understand the concept of a 'permanent record' - and that the more credit cards they apply for, the worse their 'permanent record' will become. That way, when they hit campus, they'll be forewarned against the myriad credit card companies telling them 'it's no big deal'.

Show them how to compare credit cards and figure out what credit will actually cost them. If you're not sure of it yourself, see our articles about Annual Percentage Rate and how to figure out the cost of a credit card. Make sure that they understand what a 'late payment' is, and how it will affect the charges on their credit card. When they understand that making a payment late will add $29 to their bill this month, AND increase their APR so that every bill from now on will be higher, they're far more likely to appreciate the significance of making payments on time.

Finally, before turning them loose with a credit card, take the time to sit down with them and work out a loose budget they can follow. Then make a monthly date to sit down and go over the credit card bill and credit card receipts together. You'll be able to monitor spending and help them work out ways to stay within budget while still paying off their credit card properly.

It's a common aphorism that it takes only 7 days to establish a new habit. Take a few months before your student heads off to college to help them establish good, responsible credit card habits. It's a lesson that will last them the rest of their lives.

Correct Credit Card Use

Having a credit card has become the norm in today’s society. If you have a flippant attitude and don’t use your credit card in the correct manner then you could unwittingly become deep in debt without realizing it or the implications. Looking at ways in which you can get the best use out of your credit card and keeping your spending under control may be key factors in reducing your chances of having unmanageable debt.

Paying On Time

Probably the most important thing is that you pay your bill on time, if you don’t you will incur a late payment charge and have the added interest on top of your original payment. Paying the full amount of your balance every month, if you can, will prevent the cost of interest, meaning you only pay what you have spent. If you can’t make the payment in full then at least paying the minimum payment is advisable but will cost you on interest the following month. If you repeatedly only pay the minimum payment every month and are still spending on your credit card you will soon find out that you seem to be getting nowhere in reducing your balance. Some credit card lenders include a minimum payment warning on their credit card statements. Do not ignore your bills. Ignoring your bills will only make your situation worse. If you are struggling to pay off your debt contacting your credit card provider to come to an agreement on paying the outstanding balance will help you get back on track.

Only Spend The Absolute Minimum

Keep you’re spending to a minimum and only use your credit card for things that you need. This will help keep your debt down. Only spend what you can afford to pay back as having a credit card does not mean you have extra money it only means you can obtain and pay for things a little sooner than you would if you had to save up the money.

Avoid Cash Advances

It may be a bad idea to use your credit card to obtain money form a cash machine as this will undoubtedly mean you will be charged a higher interest rate increasing your debt further. It is too easy to think that using your card in this way is likened to having money sitting in your bank account. The reality is that it is not and you are obtaining money that you don’t have. Never be tempted to use your credit card for impulse buys as you generally think about the implications after the purchase has been made.

What is Your Budget?

Have a budget and try only to spend what you can afford to pay back every month. Take responsibility for what you spend and you can have hassle free spending using your credit card without the unmanageable debt.