Credit card is simply a payment card given to consumers to enable the consumer to pay for products and services on a credit-based basis, according to the balance of the cardholder’s accumulated debt. There are many different types of credit cards. The most common are Visa and MasterCard. In recent years, there has been a renewed interest in these cards, both for the consumer and for merchants.
Merchants generally charge a one-time transaction fee when a purchase is made using a credit card. This is usually billed on a monthly basis. Some companies have no credit card fee at all. Others have a reduced credit card fee for purchases above a certain amount of money. Merchants pay the remaining balance due on a monthly basis, as well. In some cases, credit card fees are included in the cost of the transaction, whereas in others they are separately assessed.
Credit Card issuers are not the only entities that charge transaction fees. Purchasing institutions (such as department stores and drugstores) also charge a purchasing fee. These fees vary by issuer. For example, while some charge one flat rate, other cardholders are charged a variable interest rate. Still others may charge an annual fee and a surcharge for each unpaid balance.
Credit Card issuers are not the only entities that can charge fees. Credit card companies can do so as well. Whenever a balance is due, cardholders must pay the full amount, including the applicable transaction or balance fee. Cardholders who fail to make payment on the due date will incur late payment penalties. Card issuers may also impose additional penalties for failure to pay the balance in full within a reasonable period of time.
Other fees that credit card issuers commonly charge are annual fees and points. Annual fees are non-refundable and add an extra cost to credit card use. Points are applied to balances and earn rewards. Some cards offer no annual fee and zero point balance transfer options. In order to receive these rewards, holders must maintain a certain minimum balance. In most cases, cardholders must pay off the balance every month in order to maintain the required minimum balance.
Rewards cards are an attractive financial choice for many credit card holders. Reward programs allow cardholders to cash back on expenditures or use their rewards to purchase items or services at retail outlets. Cash back programs can range from earning one point for every dollar charged to a maximum of five points for purchases at select merchants. In many cases, the cash back reward is equal to a specific percentage of the purchase. Some cash back programs also allow users to cash back on gas purchases, travel miles and other point-based purchases. Some issuers require users to have a specific amount of free spending to qualify for the program.
Credit card offers are available with varying payment schedules. For example, some credit card offers have a single billing cycle, whereas others have multiple billing cycles. The terms and conditions of the various programs differ so it is important to carefully review the details.
Finally, make sure you know what the APR is. The annual percentage rate (APR) tells you how much interest will be added on the amount borrowed. Most interest rates are based on a level of fifteen percent APR. The higher the APR, the higher the amount due at the end of the borrowing period.
You may also want to evaluate the terms for interest-free periods. Many credit cards offer interest-free periods for purchases up to a specified amount after which the interest will begin. At the end of the interest-free period, purchases will be charged interest on the outstanding balance. However, make sure that any payments you make are applied to your outstanding balance before the due date. Otherwise, you could be in for an unpleasant surprise when the bill arrives!
A key aspect of successfully managing credit card debt is to make sure that the payments are made on time. This means making all monthly payments on time each and every month. It also means avoiding the use of credit cards until certain purchases have been made. While this does not give people a free lifestyle, it does help to improve their credit scores.
Finally, remember to shop around before choosing a credit cards. Each card offers different incentives, interest rates, and other features and benefits. If you are shopping for your first credit card, look for the longest zero APR term, lowest interest rate, and most attractive reward programs and features. By doing so, you can get your first credit cards at the best available prices, keep your credit history clean of errors and damaging debt, and improve your FICO score.
