Credit card use is becoming more mainstream than ever before. They offer a convenient way to manage small cash expenses or large purchases, such as cars, homes, furniture, and electronics. For this reason they are becoming increasingly popular with consumers who may not be able to qualify for a loan from a bank but can still get access to credit. If you’re thinking about getting your first credit card or upgrading your current one, you’ve come to the right place. In this article we will review everything you need to know about how credit cards work and which type of card is the best for your unique financial situation.
What is a credit card?
Credit cards are plastic payment methods designed to enable you to make purchases on credit. Unlike debit cards or cash, credit cards enable you to “carry” a small amount of money on your account and make payments in instalments. If you’re in the myaccountaccess login market for a new credit card and are unsure where to start, we’ve provided a comprehensive guide of everything you need to know about credit cards. Credit cards differ from cash advances in that cash advances are typically short term and are secured by a security deposit. With a credit card, you can charge any purchase on your card and pay the balance over time. If you pay the full amount due each month, the interest you’ll be charged is usually very low.
What types of credit cards are available?
Credit cards can be separated into two general categories: secured and unsecured. – Unsecured credit cards: If you don’t have a credit history or aren’t approved for a credit card, an unsecured card is the best option for you. Unsecured cards provide funding on whatever terms the creditor extends to you, which is usually determined by your creditworthiness. If you don’t pay your bill in full at the end of the month, the creditor can contact the original creditor and try to get paid. If you have a good payment record, your score will stay low enough for you to be offered lower rates, but if you miss a payment, you will pay a significantly higher interest rate. – Secured credit cards: If you are looking to sign up for a credit card, a secured card may be your best option. With a secured card, you make a small deposit equal to 1-3% of the purchase amount to secure the loan. Once you make the deposit, the card issuer will give you the card and assume the risk if you don’t pay the bill. Secured cards usually come with higher APRs than unsecured cards, which makes them ideal for people who want a temporary source of funding. However, the advantage is lost if you miss a payment.
How do you apply for a credit card?
Credit cards can be applied for in a number of different ways, each with their own pros and cons. – Direct application: This is typically the most common way of applying for a credit card. When applying directly, you will have to submit your application online, fill out a credit application form, and possibly undergo a credit check. Depending on the card issuer, you may also be required to provide personal information such as your address, employment details, and income. – Issuing bank: Some card issuers will allow you to apply for a credit card through the bank that issued your current account. Some banks will allow you to apply for a card from anywhere, and some only allow you to apply from the branch where you currently have an account. – Third party: Some card issuers, like American Express, only accept applications for their cards through a third party such as CardHub. CardHub will facilitate the application, run a credit check, and collect other information on your behalf.
Things to consider when choosing a credit card
– Interest rate: The interest rate charged on your card is one of the most important factors you should consider when choosing a credit card. The interest rate on a card is how much you are charged for financing the purchase. Since most card companies rely on interest to make money, you should always choose a card with a low rate. If you fail to make payments, the interest you are charged will increase, and you will end up paying more over the life of the loan. – Fees: Credit cards have a variety of fees, some of which may be included with your card. Some of the most common fees include annual fees, late payment fees, and over the limit fees. While you should avoid paying an annual fee, you should also be wary of cards that charge excessive late payment fees. – Credit limit: The amount you are approved for on your card will determine how much you can spend. If you spend more than your budget, you may end up paying more in interest than you would have if you had kept your spending under control.
The 3 most common benefits of a credit card
– Protection: Credit cards are a great way to protect yourself against a financial emergency. Not only can you put a set amount of money on your card each month, but you can also put a designated amount of money as a safety net in case you’re hit by an unexpected expense. – Credit History: Credit cards provide you with a credit history that can help you get better rates on mortgages, car loans, and other major purchases in the future. Credit cards are often required to be part of any application that involves a major lender. – Rewards: Credit cards offer incentives to use the card, such as frequent flyer miles, free concert tickets, or freebies from brands. Many credit card rewards programs offer free gift cards that can be redeemed for items such as Amazon.com gift cards or Starbucks coffee cards.
The 3 types of secured cards vs unsecured cards
– Secured cards: As their name implies, these cards require you to put up some form of collateral to secure the loan. A few of the most common forms of collateral are a deposit paid on the card, the value of your house, or your automobile. If you don’t pay off your loan, the company holding the debt can take the collateral from the card and charge you interest. – Unsecured cards: Unsecured cards are similar to credit cards that are not backed by any form of collateral. There are usually no limitations on how much you can borrow, and the interest rate charged is determined solely by the credit card company. – Secured vs unsecured: Both secured and unsecured credit cards can be a good choice for you, depending on your unique financial situation. If you have a large amount of money tied up in a home or car, a secured card may be the best option for you. An unsecured credit card may be better for those who don’t want to put any collateral up to guarantee the loan.
Conclusion
Credit cards are a great way to manage your finances without having to rely on a bank loan. With a card, you can make purchases and pay off the balance every month without having to come up with cash upfront. When choosing a card, there are a few things you should consider to ensure you get the best deal. Make sure the card has a low interest rate and no annual fee. If you can keep your spending under control and pay off the balance every month, you won’t end up paying any extra money in interest.
