Credit Cards

If you’re like me, then you have at least two different credit cards in your wallet, and all of them carry a balance to be owed. But aside from that, let’s have a look at what these wonderful pieces of plastic are all about.

Credit Card Brands

The most popular brands of credit cards are Visa, Master Card, American Express, and Discover. There are many other brands, but they are mostly affiliates of these major brands. And the affiliates are almost always banks since they are already pre-approved. In North America alone, there are over 300 established brands of credit cards. The majority of them piggy back off the main brands, and aside from the standard credit card logo, the card itself is usually catered towards each brand specifically with their own color and graphic.

Interest

The interest on most credit cards ranges between 17% and 23%. Depending on the type of card, it may even be higher than that. Interest is usually added to the balance of a credit card if the balance was not paid in full during the previous month. Because the rate is so high, people who have thousands of dollars in credit card debt are often only able to pay the minimum payment, which barely covers the interest. And so the debt climbs higher and higher each month if there is not a substantial payment made.

Charge Card vs. Credit Card

A credit card is in fact different than a charge card. A charge card demands that you pay the amount or balance in full when the statement is issued. A credit card is basically a personal line of credit which can be paid off at any time as long as the minimum payment is paid each month. Failure to do so, and you will end up in financial trouble.

Cash Advance

Some credit cards offer cash advance. This allows you to withdrawal money from an ATM machine and in some cases, a merchant. This is great if you need some extra cash to pay for something that doesn’t accept credit cards. The downside is that the interest rate on this cash is usually much higher than the regular interest rate on your credit card. To make a cash advance transaction at an ATM machine, you will be required to enter in a pin number, just as you would a bank card. The pin number is issued by the credit card company.

Credit Card Security

Security is important with credit cards. Each card has a specific account number, between 13-16 digits, depending on the brand. There is a security code on the back of the card which is made up of 3 or 4 digits. This code is usually required for online purchases. But another security feature of a credit card is the protection against fraudulent transactions.

Prepaid Credit Cards And Gift Cards

If you have credit problems, you may want to get a prepaid or gift credit card. The prepaid card is just that, prepaid. Sometimes they come preloaded with a balance, or you can transfer funds to the card through your bank account. After that you then use it like you would a regular credit card. These are handy so that you don’t spend more money then you have, they allow you to protect you main account by sometimes offering no name attached to the card. Having this type of card is great for shady merchants and online purchases.

Unsecured Credit Cards

Unsecured credit cards are basically for people who have poor credit. The interest rates and flexibility of these cards is pretty bad, but they do allow people with bad credit to build some credibility, and perhaps their credit score, providing they don’t fall behind on payments.

Credit cards can be very convenient for emergencies, rewards, increasing credit scores, and reducing the amount of charge cards that you need to carry to the store. On the other hand, if abused, they can be your worst nightmare.

Other Credit Card Answers