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Credit Cards-Basics

Posted by on Nov 4, 2016

Credit Cards-Basics

For many people the age of cash ended with the introduction of credit cards. There are many people who are not using cash at all; they pay everything with credit cards. And some people avoid credit cards, and they consider them to be ultimate evil. But in reality, credit card is a tool, and it comes down to you, how you use it. If you know how to do it then it will be one useful tool in your hands, if not, then they will be your doom.

If you don’t have any self control you will find that credit cards are not for you. Credit cards can go in red, and you can end up with a debt, if you can’t control your spending.

ccardsPay attention on terms and conditions

Many people hate credit cards because they don’t understand them and some people hate them because they know everything about credit cards. Before you get a credit card you should read terms and conditions of that credit card. It will tell you everything about that card, its APR and how that APR changes. And you should know that the issuer of the credit card can change those terms whenever they want (they must comply with the law).

Once you apply for credit card you will be given the option to choose type of interest rate, fixed rate or variable rate. Fixed rate will not be influences by the change of the interest rate on the market. It will be fixed on average percentage (but read about interest rates to determine whether that fixed rate is good). Variable interest rate changes with interest rate of the financial market. This can be good and bad for the holder of credit card. But in general it is smarter to choose fixed rate and have one less thing to worry about.
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Credit cards have limits that are far under the zero which means you can spend money you don’t have. But if you go under zero the APR will increase and you will have to pay finance charges for the money you have taken as a loan.

Once you have gone and spent too much money and you are in red the bank will give you a grace period. In that grace period you will not suffer increased interest rate or other fees that are connected to that loan. If you return the money you own your credit card score will not suffer.

Credit cards promotions

You can also take cash advances beyond the amount of money you have on the account through credit card. But these cash advances have high interest rate and additional fees that must be paid.
p3394-1Many of these things make people hate credit cards. Many special offers for credit cards involve promotions of loan, extended grace period for balancing your credit card and so on.

And many people will avoid using credit cards because they are not aware of the money they are free to spend.
Going into the red with your credit card might be convenient, but it lowers your credit score which is important for taking loans.

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