Understanding Credit Cards - 18 Points To Find Your Way Around

In the modern electronic age everything made to ease out an individual's life. From the medical field that is determining & curing the diseases, to convenient stores with easy transportation and innumerable gadgets making working a more pleasurable experience, mankind has explored the uncharted territories to their extreme depths.

In terms of banking and financial services, this revolution came in with the emergence of Credit Cards. Now-a-days, credit are not just a mere status symbol for the individuals, but somewhere down the line they have become a necessity in then developed nations. Especially, the working people living their hush-hush lives, always with speed & anguish, credit cards have come in as a real savior.

Revolutionalizing the way the people spend while shopping, credit cards have introduced a whole new aura.

Here are some key features that would help us understand this new tool of finances better:

1. In a common man's language, credit cards are a gadget or a card allowing the persons to make purchases, but only up to the limit that is set by issuing bank or company.

2. The person has to pay off the amount of balance in installments along with the interest payments.

3. Usually, the per month amount of payment of the credit card ranges from a minimum amount prescribed by the bank up to the entire remaining balance.

4. Last but surely, not the least, as supplying credit card is also a business, the longer the user takes to pay off the due amount, the more would be the interest on the balance.

5. As it is quite a responsible job to carry and use a credit card, the user must be of the legal age & must also have the capability for paying off the amount that they are spending through the credit card.

6. In the United States, almost all of them carry a credit card as they find it far more convenient as compared to using the checks or paying in cash, every time they go out for shopping.

Before using the credit cards, one must understand that these are a major responsibility and their wrong or un-invigilated usage can lead to severe debts. So, here is a detail of their types and usage so that one can make an apt option for themselves.

1. Credit cards are now becoming indispensable to many of the consumers, but they must understand the right way of using these cards.

2. The different types of credit cards available in the market are as follows:

a. Charge Cards
b. Bank Cards
c. Retail Cards
d. Gold Cards
e. Secured Cards

3. Al the above mentioned types of credit cards come along with 2 interest rate options. These are:

a. Fixed
b. Variable

4. With fixed rates, as the name suggests, the rate of interest payable is fix, so somewhere down the line, you can be sure of the amount of interest you may have to give to the company.

5. With the variable rates of interest the decision rests in the hands of the issuer. They make the decision regarding the payment of interest based on various factors.

6. At the same time we must understand that in case of fixed rate of interest the opercentage is quite high.

7. Basically, the credit card grantors usually issue 3 types of accounts along with their basic account agreements that is also known as the revolving agreement. In the 'Typical Credit Card Accounts' the payer is allowed to pay the entire amount in full monthly. They may also prefer to go for a partial payment based on their outstanding balance.

8. In case of the 'Charge Agreement' the payer is supposed to pay the entire balance monthly in order top save the interest charges.

9. On the contrary, the Installment Agreement requires the user to sign the contract as to the repayment of a fixed credit amount in some equal payments with in a definite time period.

10. There is also a further category of the credit card accounts that includes individuals and the joint accounts. Here the joint accounts order the individual alone to pay the debt and the latter is allowed to that with the partners who are responsible to repay the debt.

11. Among other common types of available credit cards are:

a. Standard Credit Cards such as Balance Transfer Credit Card and Low Interest Credit Card
b. Credit Cards along with Reward Programs such as Airline Miles Credit Card, Cash Back Credit Card and Reward Credit Card
c. Credit Card for Bad Credit such as Secured Credit Card and Prepaid Debit Card
d. Specialty Credit Card such as Business Credit Card and Student Credit Card

Once you have understood the various types of credit cards available, you should now aim to decide your goals, as to what & how exactly you want your credit card to help you. Research well about the various options available and read about each of them carefully. Next answer some questions for yourself; these are:

a. How would you spend along with the credit card in a month?
b. In case you plan to carry the balance up to the end of month, you are willing to repay exactly how much of the annual fees?
c. In case you carry with you a strong history of credit, is your credit in the need of rehabilitation?

Shopping for the Credit card

Now, before applying for the credit card look up to the following points carefully:

1. Irrespective of the credit card you have chose, be sure to discuss the specific financial needs & other financial aspects with the financial advisor and/or accountant.

2. Understand the benefits and disadvantages of having the credit card such as accessibility & availability of their services, safety, valuable consumer protection laws, etc.

3. While owing a credit card defines invincibility, it also triggers the person’s thirst towards material things. They get all the more tempted and lead to buying useless things of the items that they really do not require.

4. The user of the credit card must keep in mind that credit is a big responsibility and whenever you use that card it ads to your debts. So, you must user it very carefully else you may land owing more than what you can actually repay. This can also damage one's credit report, thereby creating irreparable credit problems.

Some of the known credit cards available in the market include Citibank, Chase Manhattan Bank, BankOne, Bank of America, Discover® Card, American Express, Advanta, First Premier Bank, HSBC Bank, MasterCard Credit Cards and Visa.