10 Benefits of Using Credit Card

1. Build credit history: Charging small amounts and paying them off is a great way to establish credit history. Without credit history, it can be more difficult to get loans (including good loans such as student loans or a mortgage), secure insurance, or even land a job. If you are able to secure a loan without any credit history, your loan rate may be higher as a result.

2. Emergency source of funds: I mean for a real emergency. Not everyone has $1000 cash to buy emergency airline tickets, make car repairs, deal with a natural disaster, etc. And in my opinion, paying 15% interest is much better than taking out a payday loan in an emergency. Some payday loans have interest rates near 1000% if left for an entire year.

3. Fraud / Theft Protection: If your card is lost or stolen, you are only responsible for the first $50 in unauthorized charges. Fraud protection for debit is similar, but only if you notify your financial institution within 2 days. If you wait longer than 2 days, you can be liable for up to $500 on your debit account. Fraud and theft protection is non-existent for cash.

4. Disputed charges: When you dispute a charge on your credit card, most credit card companies remove the charge until the dispute is resolved. With a debit card, the money will not be returned unless you can prove the dispute in your favor. With cash, the money is usually gone.

5. Rewards: Many credit cards offer rewards including cash back, airline miles, discounts, rebates, gift cards and many others. Most of these rewards are designed to get people hooked into using the cards or spending more than they would otherwise, but used properly, rewards points can earn you a lot of money. Here are some credit cards that offer a sign up bonus.

6. Convenience: I don’t like to carry large amounts of cash with me. If you lose it, it’s gone. If it’s stolen, it’s gone. Credit cards are small, convenient, and carry better protection. They are also convenient to use to buy things on-line, or to buy large dollar items. Another, convenience is travel. I will be going on a cruise next week and if I use my credit cards I won’t need to exchange as much currency. Some credit cards don’t even charge a foreign transaction fee.

7. Car rentals: Some car rental agencies will not allow you to rent a car if you do not have a credit card. Some may allow you to rent a car with a debit card, but may lock up a substantial amount of money in your account until you return the car. You won’t be able to use those funds during that time. Many credit cards also provide additional liability insurance when you rent a car. Debit cards? Not so much.

8. Extended warranties: Many credit card companies provide extended warranties on items you purchase with their card. In some cases, the manufacturer’s warranties are doubled. That’s not a bad feature!

9. Short term loan: Credit cards usually have a grace period, after which your payment is due. This can be several weeks, which allows you to earn interest on purchases you have already made. While this may not be a big deal for a hundred dollars, if you charge a thousand dollars every month and add it up over the course of a year, you can actually earn some decent money with this. With cash or debit cards, the money is immediately removed from your account and you do not earn any interest on it.

10. Budgeting tools: Most credit card companies provide detailed transaction logs which are easily downloaded into Quicken or MS Money. This makes budgeting much easier to track and plan. Yes, it can be done with cash, but it is much more labor intensive. And time, as they say, is money.

(Source: cashmoneylife.com)

How to Choose Credit Card?

Choosing a credit card can be a difficult decision, after all, there are thousands of credit cards available from various financial institutions offer different rewards programs. The credit card should be chosen on the merits that benefit the consumer and fit in with their lifestyle and spending habits. Here are some things to keep in mind when choosing a credit card – whether it is your first or your fifth credit card:

What is the Interest Rate?

The interest rate of the credit card can directly affect the expense of the credit card on a monthly basis. The interest rate should be as low as possible – or as low as your credit rating will allow. Consumers with high credit ratings are offered lower interest rates than those consumers that have a lower credit score.

The interest rate will be multiplied by the balance to come up with the minimum payment amount. Keep this in mind if you intend to carry a balance on the credit card that you are choosing. Credit card companies have three tiers of interest rates; premium interest rates, elite interest rates and standard interest rates.

Maintain a high credit rating to get the lowest interest rate.

Are Rewards Programs Available with the Credit Card?

If the credit card comes with the choice to collect rewards, there are three options for these rewards; cash back rewards, rewards points which are often given for each dollar purchased with the credit card and travel rewards that can help you to collect points with your favorite airline or travel rewards system.

There are many rewards cards available, the choice is up to you – many programs offer flexible redemption programs to change which types of rewards are redeemed through the program. Look for a rewards card that has no monthly or annual limits on the amount of rewards that can be redeemed or earned as well as a rewards credit card that comes without a separate enrollment fee – aside from that of the credit card.

What Types of Fees Are Associated with the Credit Card?

For most credit cards, there is more than just an annual fee associated with the credit card. The annual fee is the usage fee for the credit card and is often put into place when cards are associated with rewards programs.

There are many other fees which should be priced before using the credit card to ensure it is used wisely; over-limit fees, late fees for payments that have not been received on time and balance transfer fees. Knowing these fees and the amounts that they could cost the card holder has a sobering effect and could help to avoid bad credit card behavior.

(Source: www.creditcardtipsblog.com)

The Basics of Smart Credit Card Use

Using a credit card is not rocket science, but unfortunately, especially for first time card holders the card does not come with an instruction manual. Confused card holders that are unaware of policies are often the card holders that end up in debt with high interest rates, balances that have been carried from month to month and the fees associated with late payments and the card holder allowing the balance to exceed the credit limit that has been granted. Simple credit card “rules” could prevent these credit mistakes that could leave you in debt and cost you the good credit rating that the card holder has worked so hard for.

Don’t Carry a Balance

Carrying a balance can cost the card holder money each month in convenience fees referred to as interest. The monthly payment will often increase if there has been a balance on the card and are accounted as the cost of using money that isn’t yours! Many consumers are unaware that repaying the credit card up to twenty days later means that the purchases were repaid within the grace period of the credit card and therefore are not subject to interest fees. However, the card must be balance free from to month to save money this way.

Pay at Least the Minimum Payment… Pay More if You Can

Missing the minimum payment on the credit card can cost you more than high levels monthly payment and fees for missing the payment. It can cost you the good interest rate that you have been granted. Once a payment is missed on the credit card the credit card company can raise your interest rate, as you have begun to show risky payment behavior! If you are carrying a balance, your monthly payment can increase as much as ten percent.

Paying the minimum monthly payment to a credit card that is at its limit could take up to ten times longer to repay than paying double, or even triple the monthly payment. These minimum payments are designed to repay interest, with a tiny portion of the balance. Paying only the minimum payment is a great way to get into debt, and stay there.

Watch out For Fees

When using a credit card, it is important to remember that they are often one of the highest costing financial services that are available to consumers. There are many fees associated with the card including over limit fees, late payment fees, foreign transfer exchange fees, balance transfer fees and even annual fees that allow for use of the credit card. Watch these fees and you can save hundreds of dollars per month throughout the lifetime use of the credit card.

Using these tips, you should be able to use the credit card wisely and reduce the chances that you could be facing credit card debt in the future. Be sure to use the card wisely and purchase only what you can afford to repay – any other behavior is ultimately going to lead to debt.

(Source: www.creditcardtipsblog.com)

Another Credit Card Tips

Read the fine print. If you receive an offer for a pre-approved credit card or if someone says they'll help you get a credit card, find out the details first. You need to know what interest rate you will be paying and for how long. Some credit cards offer low rates as "teasers" that are raised after a certain period of time or only apply to balances transferred from other cards. You also need to know about any annual fees, late charges or other fees, and whether there are grace periods for payment before interest is applied. If the terms of the offer aren't provided or aren't clear, look for a credit card from someone else.

Shop around. Interest rates and other terms vary widely. There are also different types of cards, such as secured cards that require a deposit to cover any charges that are made, cards that can also be used as telephone calling cards, cards that allow you to either charge something and pay later or deduct the charge from your bank account immediately, and cards that can only be used to charge merchandise from a catalog. Make sure you know what kind of card you're being offered and what type of card meets your needs best.

Don't pay fees up front to get a credit card. Legitimate credit card issuers don't ask for money up front, unless you're applying for a secured card. If you are applying for a secured card, make sure you understand how your deposit will be used. Don't pay someone to help you get a credit card; if you have good enough credit, you can get one yourself, and if you have bad credit, no legitimate lender is likely to give you one.

Use your credit wisely. Many Americans are in debt because they have taken on more credit than they can handle or have not used credit responsibly. Don't apply for more cards than you absolutely need, and don't charge more than you can afford. To maintain a good credit rating, pay bills promptly. Avoid interest charges by choosing a card that offers a grace period and paying the entire balance due each monthly. If you can't pay the full balance, choose a card with the lowest interest rate.

Get help if you feel you're in over your head. Consumer Credit Counseling Service, a nonprofit organization, provides low or no cost services to consumers who need a plan to repay debts and improve their credit. 

(Source: www.fraud.org)

Get The Right Card

Be alert for companies offering a great interest rate for transferring your existing balance to their card. Usually these rates are only in effect for a short time, often six months. At the end of this time, the rate can revert to a much higher permanent rate. Keep your eye on the Annual Percentage Rate (APR); this is the figure that counts in the long run.

Lower is better: read the fine print and find the Annual Percentage Rate (APR). This is the interest rate the companies charge you if you carry a balance. You want the lowest rate possible; as each percentage point drop will save you money on the months you have an outstanding balance.

Nothing can be better: Try for a credit card that does not charge an annual fee. Many credit cards charge you a fee each year to use their cards. While this may be offset by other benefits the card may offer, you can find cards that do not charge this annual fee. Why pay for the privilege of using a credit card when you don’t have to?

Explore the options: Today’s cards offer a wide range of excellent features, including frequent flier points, programs that bank points toward a new car, and cards that support charitable organizations. Other options worth having include car rental insurance coverage, trip cancellation coverage, and extended warranty coverage.

(Source: www.hints-n-tips.com)

Protect Yourself Against Fraud

Sign new cards immediately. When you receive your new or replacement card in the mail, sign it, in ink, right away. If it is a replacement card, destroy the old card by cutting it into many small pieces.

Shred old credit card receipts. You can purchase an inexpensive paper shredder at an office supply store. All old receipts with your credit card number and any unneeded documents with your social insurance number or other sensitive personal information should be shredded before disposal. This prevents the common practice of criminals going through the trash to find receipts and stealing your identity

Never fax your credit card number. Your credit card number can lie for hours in the fax basket at the other end. Anyone passing by can record your number and begin to use your card number fraudulently. It is even possible for criminals to intercept your credit card number while the fax is in transmission.

Use caution when giving your credit card number out on the phone or on the Internet. Only give out your credit card number on telephone calls you initiate to business or organizations you trust. Never give your number out to callers who call unannounced, no matter how legitimate the call sounds.

On the Internet, look for an Internet address that begins https:\\. The “s” indicates that it is a secure connection and a small padlock symbol should appear in the bottom right hand corner of your screen, indicating it is safe to transmit your credit card number.

Call your credit card company instantly if you suspect trouble. All credit card companies have 24 hour lost and stolen help lines. If you lose your wallet or purse or have it stolen, call without delay! Much fraud happens within the first hour or two, before the victim realizes the cards are missing. Your credit card company will block your cards from being used and stop you from being responsible for any charges thieves incur.

Take advantage of any security features your card offers. Many newer cards have the option of including your photograph on the card. This is excellent protection and is highly recommended.

(Source: www.hints-n-tips.com)

Use Your Credit Card Wisely

Pay your credit card bills on time. This is the single most important thing you can do to preserve and enhance your credit rating. Always pay at least your minimum payment and allow time for your payment to reach the company if you are using the mail.

If possible, pay off your balance in full each month. If this is not possible, then make as large a payment as you can comfortably afford. Paying off or paying down your balance is a sound financial move—one that will save you money on interest charges.

If you can’t pay off your balance in full, then slow down on your credit card use for the next while. Take time to step back and have a careful look at how much you earn and how much you spend each month. A little budgeting can save you big money down the road.

Check your statement carefully each month. Review your statement carefully. Do all the charges look correct? Have any required credits been applied? Are there any unusual or unexpected charges? Your credit card company will correct legitimate errors, but only if you bring them to their attention in a timely manner before you pay your bill.

Transfer your balance to a card with a lower interest rate. If you have two or more credit cards with outstanding balances, consider moving the outstanding balances to the card with the lowest interest rate. You will save money each month and simplify your record keeping by receiving only one bill.

Negotiate for a lower rate with your credit card company. If you have a good credit history, you are a valuable asset to your credit card company. Call them and seek ways to lower your interest rate. This is often possible, but never advertised. If the interest rate you are currently paying is very high, imply you may cancel the card and go with a competitor unless they adjust your rate downward. It doesn’t hurt to ask, and you may be surprised at the results.

(Source: www.hints-n-tips.com)

Secured Credit Cards

A secured credit card is a type of credit card secured by a deposit account owned by the cardholder. Typically, the cardholder must deposit between 100% and 200% of the total amount of credit desired. Thus if the cardholder puts down $1000, they will be given credit in the range of $500–$1000. In some cases, credit card issuers will offer incentives even on their secured card portfolios. In these cases, the deposit required may be significantly less than the required credit limit, and can be as low as 10% of the desired credit limit. This deposit is held in a special savings account. Credit card issuers offer this because they have noticed that delinquencies were notably reduced when the customer perceives something to lose if the balance is not repaid.

The cardholder of a secured credit card is still expected to make regular payments, as with a regular credit card, but should they default on a payment, the card issuer has the option of recovering the cost of the purchases paid to the merchants out of the deposit. The advantage of the secured card for an individual with negative or no credit history is that most companies report regularly to the major credit bureaus. This allows for building of positive credit history.

Although the deposit is in the hands of the credit card issuer as security in the event of default by the consumer, the deposit will not be debited simply for missing one or two payments. Usually the deposit is only used as an offset when the account is closed, either at the request of the customer or due to severe delinquency (150 to 180 days). This means that an account which is less than 150 days delinquent will continue to accrue interest and fees, and could result in a balance which is much higher than the actual credit limit on the card. In these cases the total debt may far exceed the original deposit and the cardholder not only forfeits their deposit but is left with an additional debt.

Most of these conditions are usually described in a cardholder agreement which the cardholder signs when their account is opened.

Secured credit cards are an option to allow a person with a poor credit history or no credit history to have a credit card which might not otherwise be available. They are often offered as a means of rebuilding one's credit. Secured credit cards are available with both Visaand MasterCard logos on them. Fees and service charges for secured credit cards often exceed those charged for ordinary non-secured credit cards, however, for people in certain situations, (for example, after charging off on other credit cards, or people with a long history of delinquency on various forms of debt), secured cards can often be less expensive in total cost than unsecured credit cards, even including the security deposit.

Sometimes a credit card will be secured by the equity in the borrower's home.

(Source: en.wikipedia.org)

Credit Card's Benefit to Merchant

For merchants, a credit card transaction is often more secure than other forms of payment, such as checks, because the issuing bank commits to pay the merchant the moment the transaction is authorized, regardless of whether the consumer defaults on the credit card payment (except for legitimate disputes, which are discussed below, and can result in charges back to the merchant). In most cases, cards are even more secure than cash, because they discourage theft by the merchant's employees and reduce the amount of cash on the premises. Prior to credit cards, each merchant had to evaluate each customer's credit history before extending credit. That task is now performed by the banks which assume the credit risk. Credit cards can also aid in securing a sale, especially if the customer does not have enough cash on his or her person or checking account.

For each purchase, the bank charges the merchant a commission (discount fee) for this service and there may be a certain delay before the agreed payment is received by the merchant. The commission is often a percentage of the transaction amount, plus a fixed fee (interchange rate). In addition, a merchant may be penalized or have their ability to receive payment using that credit card restricted if there are too many cancellations or reversals of charges as a result of disputes. Some small merchants require credit purchases to have a minimum amount to compensate for the transaction costs.

In some countries, for example the Nordic countries, banks guarantee payment on stolen cards only if an ID card is checked and the ID card number/civic registration number is written down on the receipt together with the signature. In these countries merchants therefore usually ask for ID. Non-Nordic citizens, who are unlikely to possess a Nordic ID card or driving license, will instead have to show their passport, and the passport number will be written down on the receipt, sometimes together with other information. Some shops use the card's PIN for identification, and in that case showing an ID card is not necessary.

Merchants are charged many fees for the privilege of accepting credit cards. The merchant may be charged a discount rate of 1%-3%+ of each transaction obtained through a credit card. Usually, the merchant will also pay a flat per-item charge, called an interchange rate, for each transaction. Thus in some instances of very low value transactions, use of credit cards may actually cause the merchant to lose money on the transaction. Merchants choose to pay these costs in exchange for the increased profitable sales they can create. Thus, they are considering part of the overall cost of marketing. Merchants with very low average transaction prices or very high average transaction prices are more averse to accepting credit cards. But rates are often reduced in an attempt to include more of these types of merchants.

(Source: en.wikipedia.org)

CREDIT CARD - an Introduction

A credit card is part of a system of payments named after the small plastic card issued to users of the system. It is a card entitling its holder to buy goods and services based on the holder's promise to pay for these goods and services. 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.

A credit card is different from a charge card, where a charge card requires the balance to be paid in full each month. In contrast, credit cards allow the consumers to 'revolve' their balance, at the cost of havinginterest 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. This is defined as 85.60 × 53.98 mm in size.

(Source: en.wikipedia.org)