Credit Card Basics and Advices
A credit card is the second most popular bank card that is available as a mean for spending money based on credit. This page gives definition, some overview, advantages, disadvantages, and some basics about credit card, as well as advices about it.
Definition
A credit card is a bank card that entitles its holder to pay for goods and services based on the holder's promise to pay for these goods and services. It's part of a system of payments named after the small plastic card issued to users of the system.
Overview
Credit cards allow the consumers to 'revolve' their balance, at the cost of having interest charged. Most credit cards are issued by local banks or credit unions, and are the shape and size specified by the ISO/IEC 7810 standard as ID-1.
The issuer of the card grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.
Advantages
Credit card offer the following features/benefits:
- convenient,
- accessible credit,
- easy way to track expenses, which is necessary for both monitoring personal expenditures and the tracking of work-related expenses for taxation and reimbursement purposes;
- accepted worldwide, and
- available with a large variety of credit limits, repayment arrangement, and
- other perks (such as rewards schemes in which points earned by purchasing goods with the card can be redeemed for further goods and services or credit card cashback).
Limitations
Some countries, such as the United States, the United Kingdom, and France, limit the amount for which a consumer can be held liable due to fraudulent transactions as a result of a consumer's credit card being lost or stolen.
Fees
Credit card is one of the most expensive card to maintain. The major fees are for:
- Late payments or overdue payments
- Charges that result in exceeding the credit limit on the card (whether done deliberately or by mistake), called overlimit fees
- Returned cheque fees or payment processing fees (eg phone payment fee)
- Cash advances and convenience cheques (often 3% of the amount)by_ID. Transactions in a foreign currency (as much as 3% of the amount). A few financial institutions do not charge a fee for this.
- Membership fees (annual or monthly), sometimes a percentage of the credit limit.
- Exchange rate loading fees (these may sometimes not be reported on the customer's statement, even when they are applied)
Our Advices
The only real benefit of credit card is that you spend the money that you haven't got.
Credit is indeed a very expensive card. We strongly recommend you to read more about the fees for each type of credit card before applying.
Don't fall for the traps of "no hidden fees". When they say "no hidden fees" they are hiding somethings. All those offer often buff their "FREE" offers and hide the real fees inside a fine print.
When you take a credit card, you are taking debt. Consider carefully and if you can't afford the fees, go for a debit card instead.
For more information please browse our archives, or go for this in depth Wikipedia article about Credit Card.
The most popular website to choose credit card is CreditCards.com
