Added: 12/13/2005 |
Credit Card -- Good to Have, Important to Use WiselyGood credit history is important not only when you are applying for a credit card, or requesting to increase your credit limit, but it is also important in many other areas of your personal and professional life.
Obtaining different types of loans depends, primarily, on your credit history. If you take care of your credit rating, then probably one day your good credit will give you the possibility of obtaining the desired mortgage for your new home, a car loan, a small business loan, or other loan limits. Even when you are applying for a new job, some employers are likely to ask for your credit report to help them in deciding how responsible their job applicant is. Having a good personal credit history can be of great help when looking for a new place to live or to open your new small business. Rental owners may require a credit check before agreeing to rent you their property.
A credit card system is a type of retail transaction settlement as well as a credit system. The credit system has got its named after the small plastic cards given to users of the system. A credit card is different from a debit card (for example Maestro -- an international debit card service; is a joint venture by MasterCard and Europay International). The difference is in that the credit card issuer lends the consumer money while debit card issuer removes money from an account. It is also different from a charge card (though people often use this name to describe credit cards) in that charge cards do not give the user credit -- the charges must be paid each month in full. In contrast, a credit card allows the consumer to 'revolve' their balance, at the cost of having interest charged.
Credit cards are a great financial tool, offering many benefits:
•It can be safer and more convenient to use and carry a credit card than cash
•Credit cards offer the ability to buy goods and services now and make the payment later
•It has consumer protections under the law
•Major credit cards are accepted by storekeepers around the world
•Credit card may provide a source of cash or payment in an emergency
•Credit card can guarantee hotel or travel reservations
At the same time, having a credit card is a big responsibility. If you use it carelessly, you may have more debt than you have the ability to repay, plus you can damage your credit report, not too mention causing credit problems for yourself that can be difficult to fix.
To qualify for a credit card you must be at least 18 years old and have a regular source of income. You will still have to demonstrate that you are solvent before they grant you credit. The proof is in your credit report.
There are different types of credit card accounts. Let's have a look at them. First of all three's a Revolving Agreement (Typical Credit Card Account). You may pay in full each month or choose to make a partial payment. In case of a partial payment, you will be charged interest on the portion you do not pay. Department stores, gas and oil companies, and banks typically issue credit cards based on a revolving agreement system.
According Charge Agreement is where you need to pay the full balance each month, so you do not have to pay interest charges. Charge cards and charge accounts with local businesses often require repayment on this basis.
According Installment Agreement. Here you sign a contract and repay a fixed amount of credit in equal payments over a specific period of time. Automobiles, furniture, and major appliances as well as personal loans often are financed and paid back this way.
As you see the credit card system is very useful as well as quite complicated. So before getting a credit card carefully look through all the documents and make sure that the credit card issuer meets your requirements.
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