Credit Cards – Brief Guide

Credit card is a small piece of plastic that holds information in a magnetic strip or microprocessor, used by banks or other business institutions in financial activities for deferring payment. I.e. credit card allows card holder to purchase goods and services and pay for them later, often with interest.

credit cards

Would you like to know how credit cards work, how interests are charged and how much you should pay off each month? Whether cheap credit cards make sense for borrowers and how the most?reliable credit card issuers provide you with profound consumer protection.

Credit cards, debit cards, charge cards. What are their pros and cons?

Credit cards, even so-called ?cheap? ones, are a form of potentially open-ended borrowing. The card issuer will set you a maximum credit limit and you may spend as much as you like up to that limit, provided that you pay a minimum amount off each month. Only credit cards can provide you with a credit for an extended term. A debit card, on the other hand, will be linked to your bank account, usually your checking account. The cost of anything purchased with this card or any money withdrawn from the bank can be taken from your account instantly. You might find it more convenient to visualize a debit card as a plastic cheque! When using a charge card, you can make purchases and in some cases withdraw cash using the card, i.e. charge these costs to the card account. However, you will be required to settle down all payments each time you are sent a statement of your account, usually monthly.

Store cards and affinity cards. What are they?

Store card is a credit card issued by a particular retailer offering credit in its chain of stores. The main reason to have a store card is the situation when a retailer does not accept other credit cards. In general terms you should beware of store cards, they can and sometimes do charge up to a third as much as standard credit cards.

Unlike to store cards affinity cards are not tied to a particular store but rather to a particular, usually charitable, cause. This means that a donation will be made to the charity when you are issued with the card and whenever you make a transaction on the card a small donation will also go to the charity.

Credit card charges. How much may your credit cards cost?

It is a matter of course that most credit cards will require a recurring minimum payment of $10 or a small percentage, about 3% or 5% of the outstanding balance on your credit card account. Beware that some credit card providers stipulate an even lower minimum payment of just 2.25% or the total of charges (interest, insurance, handling fees etc) plus $10, whichever is lower. But it is most likely that this is not a way for you to save money. Usually, it happens so that the less you pay off, the more interest you are charged.

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