A credit card is a plastic payment card which enables the cardholder to pay for goods and services and to obtain cash advances up to a pre-arranged credit limit. The holder may settle the outstanding balance in full or in part by the end of a specified period, or 'roll it over' to the next period, whereupon an interest payment is due.Chances are you have received your share of "pre-approved" credit card offers in the mail, some with low introductory rates and other perks. Many of these solicitations urge you to accept "before the offer expires." Before accepting, you should shop around to get the best deal.A credit card is a great financial tool. It can be more convenient to use and carry than cash and it offers you valuable consumer protections under federal law.It is also a big responsibility and, if used carelessly, you may end up owing more than you can repay, damaging your credit rating and creating credit problems for yourself that can be difficult to fix.Applying For a Credit CardIf you're at least 18 years old and have a regular source of income, you may qualify for a credit card. However, even though you may receive many unsolicited invitations and special offers from card companies in the mail, you still need to demonstrate that you are a good risk before they will grant you credit.The answer lies in your credit report. If you've previously financed a car loan or other purchase, you probably have a record at a credit reporting bureau. This credit history shows how responsible you've been in paying your bills and helps the credit card issuer decide how much credit to extend. Before submitting a credit application, you should get a copy of your credit report to make sure it's accurate.A credit card can provide many advantages for the everyday person:• Convenience – In addition to enabling the purchase of items now, it also allows you to carry less cash and to order out of catalogs. Additionally, it is the only form of payment most online stores will accept;• Emergency Protection – Credit cards allow for emergency car repairs, health care or any number of contingencies when access to savings or checking accounts is not immediately possible;• Budgeting – Buying on credit allows for predictable payments of large-ticket items in installments you can afford. Credit Cards are also a good way of keeping a detailed record of your spending;• Security – Once cash is lost, it is gone. There is no way to get that money back or to keep someone else from using it. If a credit card is lost or stolen you can cancel the credit card. Additionally, a new card can generally be sent to you within a matter of days;• Traveling – No matter whether you're traveling across town or across the country, it is usually easier with a credit card. Most hotels and rental car companies will not take a reservation without a credit card;Getting the Best Credit Card DealFees, charges and benefits vary among card issuers. Also you'll probably want to consider if the credit limit is high enough, how widely the card is accepted, and the plan's services and features. When choosing a card, shop around and compare these important features:• Annual Percentage Rate (APR) - The APR is a measure of the cost of credit and is expressed as a yearly interest rate. Also it must be disclosed, before you become obligated, on the account and on your account statements. Some credit card plans allow the issuer to change your APR when interest rates or other economic indicators - called indexes - change. Also, be sure to check out the "periodic rate," which is the rate the issuer applies to your outstanding balance in determining your finance charge for each billing period;• Grace Period - A 'grace' period or 'free' period is the time between the date of a purchase and the date when interest starts being charged on that purchase. If your card has a standard grace period, you have an opportunity to avoid finance charges by paying your current balance in full. Some issuers allow a grace period for new purchases, even if you do not pay your balance in full every month. If there is no grace period, the issuer imposes a finance charge from the date you use your card or from the date each transaction is posted to your account. If your card includes a free period, the issuer must mail your bill at least 14 days before the due date so you'll have enough time to pay;• Annual Fees - Many issuers charge an annual fee for granting you credit. Some issuers charge no annual fee;• Transaction Fees & Other Charges - Some issuers charge a fee if you use their card to obtain a cash advance, if you fail to make a payment on time or if you exceed your credit limit. Some may charge a flat fee every month whether you use the card or not. In order to avoid surprises and excess costs, you should identify and understand what all the additional fees are before applying for a card;• Customer Service - Many issuers have 24-hour, toll-free telephone numbers where you can contact a person to discuss issues with your account;• Other Credit Card Benefits - Issuers may offer additional benefits, some with an associated cost, such as insurance, card protection, discounts, rebates and special merchandise offers. Look closely at all costs, benefits and rewards to decide if these options would be beneficial to you.Credit Card Do's & Don'tsWhile a credit card makes it easy to buy something now and pay for it later, you can easily lose track of how much you've spent by the time the bill arrives if you're not careful. Here is a summary list of do's and don'ts:• Shop around for the plan that best fits your needs;• Make sure you understand a plan's terms before you accept the card;• Sign your card immediately on receipt to prevent anyone else from using it;• Hold on to copies of sales slips to reconcile charges when your bill arrives. Double check the charges listed against your receipts. If you find a mistake or a charge that you did not authorize, promptly report any questionable charges in writing to your card company;• Don't lend your card to anyone, even to a friend. Your credit privilege and history are too precious to risk;• Keep your account information to yourself. Never give out your card number or expiration date over the phone unless you know who you're dealing with;• Keep a record - in a safe place separate from your cards - of your account numbers, expiration dates and the phone numbers of each issuer to report a loss quickly;• Only carry the credit card you think you'll need;Stephen S Alison is a retired "bean counter" who spent 26 years in middle management positions for major US financial institutions in Europe and a further 10 years as an adviser/consultant to a number of European financial institutions. He owns and operates a number of "hand built" niche websites including:
http://www.24carat-gold.com
http://www.forex-arbitrage.com
Category : Finance:Credit
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