A credit card is an electronic or plastic representation of a customer’s credit. A credit card allows the holder to make purchases on credit and is a form of “buy now, pay later”. The holder is not actually purchasing items but is instead making a short term loan of the customer’s credit and will then make payments either with a check that they have written or use the customer’s card to fund the purchase. The majority of purchases are made using credit.
How They work
Credit cards establish a line of credit for the cardholder that they may then use to purchase items. When a credit card payment is not made by the end of the month it is “lent” to the cardholder for a specified time. The amount of time usually ranges from 6 months to 18 months or even 24 months. There is an interest rate on the credit that is charged to the customer every month and when the period expires the balance of the credit will be re-charged.
An effective Credit card use includes:
– Using your credit card to make purchases or to pay bills.
– Retaining a balance that is paid into the account
– Having a monthly payment that is more than just the minimum payment.
An effective Credit card use does create a good credit score for credit history, but it does not prepare one for outstanding credit card debt and financial stress. Effective Credit card use includes paying the minimum monthly payment on time and ensuring that the card account does not get hit with penalties and fees.
Penalties can be owed when the balance of your credit card exceeds the credit limit, and there have been no payments made more than the minimum amount due. It will make your credit score go down, and you will be charged interest on the outstanding balance. If you only make minimum payments, then you are juggling your debt and maybe even creating more credit card debt.
To protect the consumer and the interest of the credit card issuer, there are Federal regulations about Credit Card Debts. What type of over-the-limit payment and when can be Championship Debt? This debt will make the credit card company ask for fees and interest to the consumer. If the consumer does miss or are late with a payment, their debt can trigger a variety of fees and changes to interest rates. This can be devastating to the consumer.
How Cards Work
For ” Driver’s License” or ” passport” cards to be funded the consumer will show proof of income, identity, and residence. It is done by using a credit card that is funded by the consumer and endorsed by the bank or company that issues the credit card. Each Credit Card has its funds which are transferred from the card holder’s account to the issuer’s bank. Most credit cards are issued by Bank of America, Chase, Discover Card, and Visa up to the Amazon.com corporation.
Types of Credit Cards Millions of potential consumers are each approaching their Providers of Credit Cards and deciding which best suits their needs, but before going there you may want to educate yourself and ask the average consumer questions such as:
How Long Does it Take to Pay Off My Credit Card Balance?
There is currently a growing trend of Credit Card which allows the customer to go to the network and transfer money electronically (debit cards) this concept was started by banks to entice their customers to use credit cards on their servers. Card providers aim to get consumers hooked on using their card and then get them to spend even more. Usually, the process takes about 14 days from the order being placed allowing for payment through their bank account or via third party transfers. Do those numbers sound fair to you?
What is the Minimum Payment Each month?
This is the main question a consumer may ask themselves or write themselves down and then ask their Providers to calculate it to see if they can afford to pay it or not. Few Providers will allow a small minimum payment and will seek the full amount due from the customer for payment. A Patient CustomerFirst time cards will normally offer the lowest APR’s. Then one of the earliest cards outstanding will have the balance (or the previous balance when due) apply the principle and interest to that balance. Most cards will progress to the highest APR’s as a day to day card. An educated consumer will understand that an APR rate of 13.99% applied to a balance of $100.00 will increase that balance to a hologram.
Check out my other financial tips on my blog: