A Credit Cards Primer
Since its introduction a few short decades ago, the humble credit card has changed the face personal money management. Working people now use their credit card for everyday living which a slightly worrying fact. Perhaps originally thought of as a gimmick, the credit card has quickly become the most popular method of spending money everywhere.
In layman’s terms, a credit card allows a person to make purchases up to the limit set by the card issuer. Each month, the owner of the card can decide to pay an installment off the balance plus any interest or repay the owed amount in full. Normally this minimum payment is a percentage of the amount owed or a minimum amount set by the card issuers. Even though they will pay much more in the end, paying a regular monthly amount suits some individuals more so they are happy with the fact that they will pay more this way.
Only persons over the legal age are permitted to hold a credit card as it is a huge financial responsibility. Most of the adults in the U.
Interest calculated on a credit card is either variable or fixed. Compared to variable rate cards where rate may be subject to change depends upon the credit card issuer’s discretion, fixed-rate carry higher interest rates. When a Charge Agreement method is used then the card user agrees to pay the full balance each month without incurring interest charges whereas the Installment Agreement is based on a monthly repayment. People that prefer to keep their finances separate from their partners may decide to use an individual credit card rather than a joint account.
Don’t forget you must be strict about how much you intend to spend on your card each month or you may have a problem making the payments. Checking out what’s available will be the best move you make as there is such a variety of card types, charges and agreements available and it is easy to just sign up for the first one that comes your way. List what it is you want your credit card to do and match those requirements with the card that meets them.
Regardless of the type of credit card you choose, be sure to discuss your specific financial needs with your financial advisor or accountant before applying for any credit card. You probably recognize many of the big credit card companies such as Chase Manhattan, MasterCard, HSBC, Bank of America and American Express although there are many more.
The worst situation you can find yourself in not being able to meet the monthly repayment. At all costs, avoid the situation where you then have to spend time repairing your credit report.
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