Credit Card Questions and Answers

Basics of Credit Cards

Q. What is a credit card?

A. credit card is a piece of plastic, usually 3 inches by 3.5 inches, which has a magnetic strip on one side and numbers imprinted on the other. The numbers are unique to each card. These are important for keeping track of expenses that one makes with a credit card.

Q. How does a credit card work?

A. Aside from the physical features, it is used to pay for and keep track of expenses. Typically, a card holder will have a set $ credit limit that they can spend using the card. Each time something is purchased, the balance on the card gets closer to its maximum limit. Once the limit is reached, no further purchases are permitted unless you are a special card holder.

Each month a payment towards the balance of the credit card is required. There is always a minimum payment required which usually covers the interest and part of the remaining balance. Credit card interest is how the credit card companies make their money.

Q. What is a secured credit card?

A. A secured credit card is the same as a regular credit card except that the credit limit is bound by, and determined by, collateral. These types of credit cards are the banks way of protecting themselves from people who may be a credit risk. The most common type of collateral used is a home that has some equity.

Q. Should you sign your credit card?

A. Despite the fact that, in these days, most merchants won’t check for a signature on the back of a credit card, you should sign it anyway. In the past, verifying the signature on the card to the signature on the receipt was one way to prevent id theft and/or fraud. However, with more consumer protection policies in place, online purchases, and advanced theft techniques, the signature does very little to protect you against credit card fraud.

Q. Why should I get a credit card?

A. Only you can decide if you should get a credit card. However, you may want to a credit card to help build credit, pay for purchases without the fear fraud, or simply for the ease of paying for things instead of cash.

Q. What does CVC mean on a credit card?

A. C.V.C. stands for “Card Verification Code.” There is also C.S.V, Card Security Value or Verification. These values are to help increase security and verification of your credit card which is especially important when making online purchases.

Q. How does credit card interest work?

A. Basically, when your credit card bill is due you have options. If you pay the full bill before the final payment date, then you will not be charged interest. If you pay part of the bill, and paying more than the minimum stated on the bill, then you will be charged interest on remaining balance which will be added to your bill the following month.

Q. How does credit card APR work?

A. A.P.R. stands for Annual Percentage Rate. Since credit card interest is calculated on a monthly basis towards your bill, you must divide your APR by 12 as there are 12 months in a year. For example, if you had a 19% APR, your monthly interest rate would be 1.58% (19 divided by 12 = 1.58).

Q. What does credit card insurance cover?

A. Each credit card company has difference rates and policies when it comes to credit card insurance. And some policies require an annual fee while others are automatically added to your account. The most common types of insurance offered by credit cards is travel insurance, car rental insurance, and credit card fraud protection.

Q. What will my credit card payment be?

A. Your credit card payment is calculated based on the amount of credit used, previous owing and unpaid balance, interest and other related account charges. Minimum payments are based on the total amount owed plus the other charges as mentioned above. Each credit card company has different minimum payment formulas, but they all cover the total amount of interest and some of the balance owing.

Q. How can I check my credit card balance?

A. There are 4 ways to check your credit card balance.

1. You can call the customer support hotline for your credit card. This number can be found on any of your billing statements or online.
2. If you already have an online account set up, you can check this information there.
3. If your credit card is affiliated with your bank, then you can check your balance at an ATM. Usually you will need a pin number for your credit card.
4. You can look at your last billing statement and calculate how much you have paid and how much you have added since then.

Q. How can I stop credit card offers?

A. If you hate receiving credit card offers, there are two things that you can do. The first is that you can call your credit company and request a stop on all offers. Not all credit card offers come from the credit card company directly. Instead, many are sent out by bans because they are affiliated with the credit card company. So the second way to stop credit card offers is to talk to your bank. Let them know that you want to put a stop on the offers as well.

Q. Can I use someone else’s credit card?

A. The answer is yes and no, because it depends. Some credit cards are only allowed to be used by the person named on the credit card. However, it is much harder to prevent this from happening with online purchases. If the name and shipping address matches the credit card account information, then there will be no problem. However, for in person payments, the teller or cashier may deny payment if they suspect you are not the card holder.

In other cases, additional names and addresses may be added to a credit card. This is popular husbands and wives who wish to use the same credit cards without incident.

If you want to borrow your friend’s credit card, it is not usually acceptable unless your friend is the one doing the transaction and it may violate the terms and service agreement with your friend’s credit card.

Q. Can you put money on a credit card?

A. It is possible to load money on a credit card if you don’t owe anything. This is especially the case when it comes to secured credit cards and prepaid credit cards. However, there are no benefits to load extra money on a regular credit card. You are better off to keep the money in your bank account, use the credit card, and then pay the bill when it arrives.

Applying For Credit Cards

Q. How to apply for and get a credit card?

A. Aside from the credit card applications you may receive in the mail, most banks have online applications. It is usually best to apply for a credit card from the bank in which you do most of your banking. If you aren’t comfortable in applying for a credit card online, you can always make an appointment at your bank or drop off a completed application.

Q. Will I be accepted for a credit card?

A. Having your credit card application accepted will depend on your credit history and current employment status.

Q. How to get a credit card with no credit or bad credit?

A. You can apply for a “secured credit card” and/or “prepaid credit card.” Both of which do not rely on your credit history. They rely on upfront payments or credit backed by assets or collateral.

Q. Should I get a student credit card?

A. Student credit cards can be a blessing and a curse. If you are able to make your payments every month then it would certainly be convenient. However, if you are only seeking a credit card to use as a loan, you may find yourself in financial trouble quite quickly.

Q. Can I get a credit card under the age of 18?

A. To best answer this question, please take in to account the following as stated on bankrate.com: “The Credit Card Accountability, Responsibility and Disclosure Act of 2009 prevents credit card issuers from issuing cards to underage consumers unless the applicant has a co-signer or can show an independent means of repaying any obligation."

Q. Can I get a credit card with a cosigner?

A. Yes, but not all credit cards allow cosigners. So it is important to check with each credit card issuer to see if they allow cosigners. However, you could be added as a secondary credit card user on someone else’s account with most credit card issuers.

Q. How long does the credit card application take?

A. Depending on the method that you apply (snail mail, electronic, phone), a credit card application can be instantly approved. However, depending on the card issuer, you may have to wait 1-2 business days with most issuers.

Q. Can I get a credit card with no job?

A. No. Credit card requirements include that you are employed or have assets to back as collateral. However, you may become an authorized user on someone else’s account or a co-signee on a joint credit card account. If you are self-employed, you may be able to apply for a credit card if you can prove your income to the satisfaction of the credit card issuer. Most often, self employed business owners will apply for a business credit card or follow the secured or prepaid route.

Q. Why can I not get a credit card?

A. If you do not have a means of consistent income or have a very poor credit history, it is unlikely that you will be approved for a regular credit card. If you have had a credit card in the past, but the account was closed due to debt consolidation or any other reason out of your control, it is most likely that the credit card issuer or bank will hold that against you as well.

Q. Where can I purchase a prepaid credit card?

A. Many banks offer prepaid credit cards, but you can also find them at most retail stores by the phone cards. These are a great way to keep anonymous or just carry cash in the form of a single card.

Just to note, many prepaid credit cards that are offered through banks require you to fill out an application. The plus side to that is that they have a reloadable balance. This means you can add more funds to the card using your banking information. On the other hand, many prepaid credit cards in retail stores are more like gift cards that you cannot reload.

Using a Credit Card

Q. Can you buy gift cards with a credit card?

A. Yes

Q. How does a prepaid credit card work?

A. A prepaid credit card functions just like a regular credit card. However, the amount of credit is dependent on how much you have preloaded on to the card.

Q. Where can I use my prepaid credit card?

A. You can use your prepaid credit card in almost any place that you can use a regular credit card. This includes making online purchases.

Q. How can I get cash from my credit card?

A. You can get cash back from some credit cards. However there are very few retail merchants who will offer such services. The best way to get cash from your credit card is to withdraw it from an ATM or bank machine. Most credit cards have this feature by default or by request. You will be sent a PIN number and a maximum withdraw limit. From there it functions just like your debit card.

Q. Can you buy a car with a credit card?

A. Yes, Most car dealers accept credit card payments. Just make sure that your daily credit card usage limit isn’t lower than your intended purchase. If it is, you may need to contact your credit card company and ask them for a temporary increase for your purchase.

Q. Can you pay your taxes with a credit card?

A. Yes. They want the money that you owe them and give you plenty of options to make payments. Please read the details on the payment page carefully as there may be a service premium for making a credit card payment for your federal taxes.

Q. Does the IRS accept credit card payments?

A. Yes. The Internal Revenue Service accepts credit card payments via third party service agents who are contracted by the IRS.

Q. Can you pay mortgage with credit card?

A. In some cases, a mortgage company may accept credit cards if they have contracted agreements with a credit card company. Typically, they do not accept credit card payments because they know how dangerous credit cards can be. They also factor in to account the money they would lose from credit card service fees. Each time they accept a payment, they are obligated to pay a certain percentage of the payment to the credit card company. This adds up to a lot of money when you consider how many mortgages the mortgage company may hold.

Q. Can you pay rent with a credit card?

A. Yes, so long as your landlord can accept credit card payments. Larger rental properties usually have a property management company looking after everything. This usually means that they can accept a wide variety of payments.

Q. Can I buy foreign currency with a credit card?

A. Yes. You can buy foreign currency from your bank or kiosk at an airport using a credit card. However, there may be an extra fee for the transaction.

If you are able to withdraw money from your credit card at an ATM machine, you can withdraw money from a bank machine in another country, in their currency, so long as they use the same network. A popular network is the cirrus network in which the logo can be found on thousands of bank machines across the globe.

Q. Can you buy money orders with a credit card?

A. Unfortunately, no. The purpose of a money order is to send money in a secure fashion backed by real money. Credit cards leave open many possibilities for fraud in this instance.

Q. How can I accept credit card payments online?

A. If you are a business, you can purchase a credit card merchant service to act as a gateway between the credit card funds and your business bank account. If you are just an ordinary person like me, you can accept credit card payments through services like Paypal.com, for fee of course.

Q. How does online credit card processing work?

A. A simple explanation for online credit card processing looks like this:

1. Customer visits a website, chooses some items to add to a shopping cart, and clicks check out.
2. The customer enters their shipping and credit card information and clicks the pay button.
3. The information is verified and transacted behind the scenes through a credit card gateway, or online credit card processing merchant.
4. The information is sent to and verified between the gateway and the credit card issuer. If the credit card issuer accepts the transaction, the funds are forwarded to the gateway and then to the online website’s bank.
5. The information displayed to the customer will show that the transaction was approved or denied.

Q. How to accept credit card payments?

A. Credit card payments can be accepted through a credit card machine or an online gateway.

Q. How much does a credit card machine cost?

A. Many credit card machines are included for free in a long term contact. The rental of a credit card machine can be as low as $6.95 per month. The purchase of one can range from $199 to $795. With both options, there will be a cost per transaction on top of the sale or rental of a credit card machine.

Q. How much does a credit card transaction cost?

A. Depending on the size of your business and your qualification of a merchant account, it can cost anywhere from 1 to 15 percent of the total, per transaction. If you have a large volume of transactions and are able to obtain a merchant account, the fee per transaction can be as low as $0.25.

Building Credit With A Credit Card

Q. Should I get a credit card to build credit?

A. If you are looking to build or rebuild your credit score, a credit card can be one of many options to help do that. Just try not to get carried away, because a single negative can outweigh a handful of positives.

Q. Will getting a credit card improve my credit score?

A. It won’t improve your credit score automatically. In fact, it may work against you if you have too much credit available and not the means to pay it back promptly if it was all used up.

Q. Will cancelling a credit card hurt my credit score?

A. In terms of being a black mark on your credit score, no. However, there are factors such as increased credit inquires, how much money you owe on the credit card, and even the number of accounts you have credit with that can affect your credit score. So by cancelling your credit card, it could affect the other factors that make up your credit score.

Credit Card Debt Questions

Q. What happens if I don’t pay my credit card?

A. If you don’t pay the minimum amount due by the billing date, the balance will carry over to the next month with extra fees for non-payment. If this continues month after month, you will receive calls from the billing department about how they can get payment. If you are unable to make a payment by then, they will usually send your information to a 3rd party collection agency. And each non-payment will show up on your credit score and work against you.

Q. Does credit card debt die with you?

A. In 99% of cases, no it does not. After death the debt, like any other debt, is then owed by your estate. However, some credit card companies offer a form of insurance on your credit card, in the event of death or accident, which waves any balance under those circumstances.

Q. Does my credit card cover rental car insurance?

A. This is going to depend on the policies and options in which your individual credit card issuer allows. Many credit cards offer car rental and travel insurance for an extra annual fee.

Q. Can you get a credit card after bankruptcy?

A. Yes. The best place option to obtain a credit card after bankruptcy is to get a secured credit card with a low interest rate.

Q. How does credit card consolidation work?

A. Credit card consolidation involves a 3rd party agent, or debt consolidation company, to act on your behalf. They negotiate repayment terms with each of your credit card issuers. Then you are required to make a monthly payment to the debt consolidation company who then makes the payment to the credit card issuer. You do not make any more payments to the credit card company and your credit card is usually deactivated to prevent any more spending. Once all of your credit card debt is paid off, the credit card issuer usually cancels your credit card on your behalf.

Q. How does credit card fraud happen?

A. It can happen by someone simply copying your credit card numbers and personal information, to someone going through your trash, getting as much of your personal information as possible and opening a new credit card account in your name.

Q. Can I freeze my credit card?

A. For an in depth explanation, please refer to my article on How to Freeze Credit Cards.

Q. Can you transfer credit card balance to another person?

A. No.

Q. Can credit card companies garnish wages?

A. Yes they can. However, they must first get the approval from a judge after they have won a lawsuit against you.

Q. Is there free credit card help available?

A. If you are struggling with your credit card payments, you can make an appointment with your bank. You will speak to a financial advisor who can show you different options for your personal situation. But please keep in mind that they may not have all the answers, and they may encourage you to take up some of their services. If you are looking for free credit card help elsewhere, it is important to use as much caution as possible. There are many deceiving people and companies who are out to take advantage of people who have serious financial problems.

Q. Are there Federal programs to help with credit card debt?

A. Extreme cases where courts are involved, yes, otherwise, no.

Q. Can a credit card company freeze my bank account?

A. No they cannot. The only way for this to happen is if they go through a court hearing and the judge decides that it is the best course of action.

Q. Will credit card companies negotiate debt?

A. Yes, but not with you personally. They will only negotiate repayment with a credit card consolidation company or collections.

Q. Can I go to jail for credit card debt?

A. Yes. If you are taken to court and a judge deems jail time suitable for the legal action taken against you, you will have to serve jail time.

Q. Will credit card companies sue me?

A. In extreme cases, yes. Typically though, they will sell your account to a collection agency and the collection agency takes over collections. By doing this, the credit card issuer will take a loss of money, but they figure it is better than spending time and money trying to get the money from the person directly.

Q. Will credit card companies lower my interest rate?

A. One of the easiest ways to find out is to call them and ask for a lower rate. You might be surprised! Even if they lower it by a couple percent, that will surely have an impact on your over all account. It is a good idea to have an account in good standing before making such requests.

Q. What can credit card companies do to collect debt?

A. They can call you to ask for payment and freeze your account. They can send your case to a collection agency. Anything else, they are required to go through a court of law.

Q. Can credit card companies take you to court?

A. Yes.

Q. Can you claim credit card interest on taxes?

A. No. Credit card interest is considered “Personal Interest” and cannot be claimed.