Credit Card Info For Dummies, Beginners and First-time Credit Card Owners
Posted March 20th, 2010Credit card info for dummies
There is a lot of credit card info available on the Internet, but for people that don’t have a card and really don’t understand what they are all about, it can be very confusing. This guide will help you understand the basics about credit cards.
A credit card is a small piece of plastic that is issued to cardholders from a bank or financial institution. It represents an agreement between the cardholder and the company issuing the card for credit. The person with the card can use it to get a cash advance loan to make a purchase.
A charge card is not the same as a credit card. Every month the balance needs to be paid fully on a charge card, whereas with a credit card this is not the case. With a credit card, you can carry a balance forward to the next month, as long as minimum payment requirements have been met.
Once the balance is carried over to the next month interest charges will begin to apply to any balance owing. The amount of interest will be determined by the original agreement signed by the cardholder and given out by the credit card issuer.
How do credit cards work?
After an application has been accepted by the credit card company, the cardholder can start making purchases at any store, whether it be online or at a retail store. Other transactions such as cash advance his can also be made.
When a purchase has been done, the cardholder agrees that he will pay the card issuer. This agreement is done through the signing of the receipt that shows the details of the card and how much needs to be paid. It can also be done when the holder enters his personal identification number which is also known as a PIN.
A verification system is used to show the merchants that the credit card is a valid one and that there is enough credit on the card to allow the purchase. This is done electronically with a communications link. There is a magnetic strip on the back of the card, or a chip, that allows this information to be transmitted.
Online transactions use other verification systems to make sure that the card is valid. Quite often the cardholder must type in a security code that is printed on the back of the card. Sometimes the holder must fill in his address.
A statement is sent every month that shows what purchases were made, any other transactions that were done, all the outstanding fees and the total balance. Charges can be disputed if the cardholder feels that they may be incorrect.
On the statement there will be a due date, and the cardholder must make sure that his payment is received by the issuing bank by this date. This minimum payment amount will also appear on the statement, which lets the bearer of the card know the minimum amount that needs to be paid. This minimum is usually based on a percentage, and must be paid or else the cardholder will probably lose any further access to credit on the card.
If the balance on the statement is not paid in full by the due date, interest charges begin to apply. When the contract has first been signed, interest charges will appear in fine print on the terms and conditions for all the different types of transactions. It is important to know how much interest is being charged for each transaction because the amounts of interest can vary greatly. This credit card info is necessary to learn and remember when a person decides to accept the responsibility of having a credit card.
Payments can be made in various ways according to the bank that has issued the card. Most financial institutions allow payments to be made with online banking, payments at a branch or by mail.
Credit Card Benefits
The main benefit associated with owning a credit card is the convenience. A credit card is like a short-term loan that can be used for purchases like getting money in the form of a cash advance. They can also be used to pay bills and make payments.
If you look for a credit card that offers rewards points to its customers you will be all the more ahead. Some programs offer airline tickets, merchandise or cash. There are a lot of different awards programs available and each had has its own set of rules for redeeming these points.
Drawbacks of owning a credit card
Many people have a hard time understanding all of this credit card info and get carried away with their card. Some never read the terms and conditions to find out all the fees and charges on their card and are unpleasantly surprised when the statement shows up and they cannot afford to pay all of the fees. Some people just have bad spending habits and have a hard time controlling debt. This can lead to bankruptcy and a problem with their credit score.
Hopefully this credit card info for dummies has helped explain the basics about credit cards. Getting a credit card is a responsibility and a luxury. Treat your card with care and you will be able to keep it for many years to come.
Cheapest MasterCard in Australia
If you are struggling to find which credit card is truly a great deal, then look no further than the Bankwest Breeze MasterCard. Awarded the Cheapest Credit Card and Cheapest Balance Transfer card by Money magazine, the Bankwest Breeze MasterCard is a great card to consider with a low interest rate on purchases and balance transfers.
- $69 annual fee
- 10.99% p.a. on purchases
- 4.99% p.a. for 12 months on balance transfers
- Cash Advance Rate of 21.99% p.a.
- 55 days interest free
- Minimum Income Requirement of $20,000 p.a.
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