Credit

Credit cards are the small but powerful plastic cards issued by financial institutions to users as a system of advanced payment. These cards allow cardholders to buy goods using advanced credit (or cash advances) with the understanding that the cardholder will pay back the financial institution for the purchased goods. Unlike a charge card that needs to be paid in full every month, credit cards give cardholders a continuing balance of debt subject to interest.

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The Advantages of Credit Cards

There are a great number of advantages to having and using a credit card. Here are just a few:

  • They’re convenient.
    You spot something you need or want and without the cash to pay for it, you can make that purchase using your credit card. Just be careful you don’t spend what you can’t afford to repay at the end of the month.
  • You get a line of credit (and rewards) for free.
    If you are disciplined enough to pay the balance at the end of every month, you won’t accrue interest. You practically have a line of credit that’s free to use. With all the different reward programs, you’re even given free gifts for simply using the credit card.
  • You can keep track of spending.
    Credit card issuers usually have some form of online account management where all expenses and payments can be tracked, tagged, printed out and much more. Some even have the ability to send email and text message alerts. It’s probably much better than your grandmother’s old notebook of expenses.

General Disclaimer: The articles on this website are for informational purposes only and should not be used as a substitute for legal advice.

 

 

Tips for Using Credit Cards Responsibly

Think of it as a loan (or an ATM debit card).
You need to pay back everything you buy with a credit card. Therefore, don’t buy things you can’t afford. An alternative is to think of it as an ATM debit card for your checking account – after all you SHOULD have money in the bank to pay for what you’re about to buy, right?

Pay the balance on time.
Late payments (or no payments) mean finance charges on the remaining unpaid balance. Plus, if you only pay the minimum, the interest on the unpaid balance will continue to rise – meaning your purchases could end up costing much more than the original price.

Save the receipts.
Use your credit card receipts side by side with your monthly bill. Look for irregularities and report problems to your credit card issuer immediately.

Remember: Your credit rating affects your life.
Late payments or even non-payment of debts can damage your credit score. This affects your credit history negatively — making it harder for you to purchase larger items such as cars or property. IT could also become more difficult to rent an apartment, find affordable insurance, or even—in some extreme cases—land a good job.