At A Glance


Credit card
A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. The issuer of the card grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user. Usage of the term "credit card" to imply a credit card account is a metonym.

A credit card is different from a charge card: a charge card requires the balance to be paid in full each month. In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest being charged. Most credit cards are issued by banks or credit unions, and are the shape and size specified by relevant authority/body.

Credit cards are great yet they are also extremely dangerous, if you don’t use them smart. You should be aware of several things before deciding if using a credit card is right for you.

Credit cards are very convenient there’s no denying this. You can shop online with credit card, you can make purchases over the phone with it, and you can use credit cards almost in any brick and mortar store. Credit cards can help you built your credit history, granted you pay your credit card bills on time. Credit cards are convenient, but it’s very easy to overspend and then you might have to pay high interest fees.

Secured credit card is a credit card that is secured by deposit. If you have had credit problems or have filed for bankruptcy in the past the secured credit card might be the only avenue to rebuild your credit history.

Typically, the cardholder must deposit between 100% and 200% of the total amount of credit desired. Thus if the cardholder puts down $1000, they will be given credit in the range of $500–$1000. In some cases, credit card issuers will offer incentives even on their secured card portfolios. In these cases, the deposit required may be significantly less than the required credit limit, and can be as low as 10% of the desired credit limit. This deposit is held in a special savings account. Credit card issuers offer this because they have noticed that delinquencies were notably reduced when the customer perceives something to lose if the balance is not repaid.

The cardholder of a secured credit card is still expected to make regular payments, as with a regular credit card, but should they default on a payment, the card issuer has the option of recovering the cost of the purchases paid to the merchants out of the deposit. The advantage of the secured card for an individual with negative or no credit history is that most companies report regularly to the major credit bureaus. This allows for building of positive credit history.

Although the deposit is in the hands of the credit card issuer as security in the event of default by the consumer, the deposit will not be debited simply for missing one or two payments. Usually the deposit is only used as an offset when the account is closed, either at the request of the customer or due to severe delinquency (150 to 180 days). This means that an account which is less than 150 days delinquent will continue to accrue interest and fees, and could result in a balance which is much higher than the actual credit limit on the card. In these cases the total debt may far exceed the original deposit and the cardholder not only forfeits their deposit but is left with an additional debt.

Most of these conditions are usually described in a cardholder agreement which the cardholder signs when their account is opened.

Secured credit cards are an option to allow a person with a poor credit history or no credit history to have a credit card which might not otherwise be available. They are often offered as a means of rebuilding one's credit. Fees and service charges for secured credit cards often exceed those charged for ordinary non-secured credit cards, however, for people in certain situations, (for example, after charging off on other credit cards, or people with a long history of delinquency on various forms of debt), secured cards can often be less expensive in total cost than unsecured credit cards, even including the security deposit.

Sometimes a credit card will be secured by the equity in the borrower's home.

Obtaining a secured credit card will require depositing a certain amount of money with the credit card issuing bank. The amount of the security deposit will depend on the amount of the credit limit you are requesting. Most of the time banks will require 100% of your credit limit as a security deposit. Secured credit cards come with higher interest rates compared to most regular unsecured credit cards.

When shopping for a secured credit card, it’s wise to work with recognized financial players. It’s best to choose Visa, MasterCard or American Express cards, because they are accepted almost everywhere.

No Interest Credit Cards, who wouldn’t want one? Wouldn’t it be good to have a 0 interest credit card? If you get an offer for a no interest credit card or for low interest credit card, check when the introductory period end does. That’s right the 0% interest rate will apply for a limited time only (usually 6 months). After the initial introductory interest rate, you will be charged a regular interest rate. Another important think to check is what exactly will be the interest rate of the card after the grace interest period. Some of these 0 interest cards, charge really high interest fees after the introductory period ends.

Getting a 0% balance transfer card that doesn’t charge any interest during the introductory period can boost your finances in several important ways:

No interest credit cards allow you to consolidate high-interest debt. You can use money from 0 balance transfer cards to pay off debts from higher interest cards. Some credit card applications may also have special offers of low interest rates on balance transfers made with the application.

No interest credit cards can give your budget a cash infusion. If you have unusually high expenditures or need extra cash, this credit card can help tide you over until your income catches up. Many 0 interest credit cards will even transfer money directly to your bank account or send you a check.

No interest credit cards can help you make purchases earlier. This type of credit card gives you the option to make large purchases earlier than you otherwise could.

To get the most out of your credit card, read the terms and conditions carefully before you sign up. For all balance transfer cards, the 0% introductory rate will expire after a designated period. Make sure you know exactly when that period ends by reading the terms of the balance transfer, so you don't get hit unexpectedly with a high interest rate that will undermine your savings.

Also be sure you are aware of what the transaction fee is for each balance transfer. In some cases there is no fee, and that will be indicated in the card benefits or terms and conditions. Otherwise it is usually capped at $50 - $75 per transfer. Many credit cards consider convenience checks as balance transfers, but the money can go into your checking account instead of paying off another credit card. Again, make sure you are aware of the 0% interest period for the convenience checks and the transfer fee.

Credit cards with low introductory rates on balance transfers or purchases offer many advantages. These cards come with as little as a 0% annual percentage rate and the introductory rate can last up to 12 months, or in some cases, till the balance is paid off.

  • Consolidate High-Interest Debt: Use the money from a 0% or low-interest balance transfer to pay off debts with higher interest rates. You will save money on interest and may lower your total monthly debt payments as well.

  • Give Your Budget a Temporary Cash Infusion: If you are faced with higher than usual expenditures or need extra cash, a 0% balance transfer can give your budget a temporary cash infusion to tide you over until your economic situation improves. Many cards will transfer the money to your bank account so you can pay off bills and other expenses, or they may send you a check that you can deposit directly into your bank account.

  • Make Large Purchases Earlier: A card with a 0% interest gives you the option to make a large planned purchase earlier than you would otherwise be able to. It can also help you save money on interest, if the purchase is something you would usually finance, such as a car. Just be sure you have alternative financing lined up when the promotional rate expires.
If you pay the balance off in full before the introductory rate expires, these cards offer many benefits. Pay careful attention to the terms and conditions of the card, however, so you know exactly when the introductory rate expires and what would put you at risk for triggering higher rates.

Before getting a no interest credit card, check the fine print, which specifies what happens if you are late with your credit card payments or if you max out your credit card. Some credit card issuers will end the introductory interest rate if you go over the credit limit or if you have even a single payment late. Check also to see if this fancy “0 credit card” have any additional fees – application fees, yearly fees, etc. Another thing to consider is that the 0 interest rate that the card advertises might be applicable only for certain transactions

When accepting payment by credit card, merchants typically pay a percentage of the transaction amount in commission to their bank or merchant services provider. Many credit card issuers share the commission with the card holder by giving the card holder points, airmiles or a monetary amount. This last benefit, a monetary amount, is usually known as cashback, although it is often separated into two words (cash back). Where a card issuer operates such a cashback scheme, card holders typically receive between 0.5% and 2% of their net expenditure (purchases minus refunds) as an annual rebate, which is either credited to the credit card account or paid to the card holder separately.

Recently, major card issuers have raised the cash-back percentage up to 5%. The 5% cash back rate usually applies only to purchases made at grocery stores, pharmacies, and gas stations for 6 months. This high rate of cash back was set to grab the attention of potential applicants for them to consider applying for the card. After 6 months, it drops from 5 percent to 2 percent and 1 percent for all other purchases. Typically the cash back rate for all other purchases is around 1%.

Rewards based credit card products like cash back are more beneficial to consumers who pay their credit card statement off every month. Rewards based products generally have higher APRs. If you don't pay your balance in full every month the extra interest you would be paying will eclipse any rewards you earned.

Due to increased gasoline (gas) prices, gas cash back cards or Gas rebate Credit cards became very popular among the consumers. Companies provide an average of 3% APR on new gas credit cards. The main idea behind gasoline discount cards is that cardholders obtain a sure percent of the sum they consume on gasoline each month in the form of a rebate check at the end of the year. It works similarly to a cashback discount recognition card with one noteworthy exception: the gasoline discount is frequently applied each month, whereas most cashback cards ship away discount checks formerly a year. This makes the savings easier to view for most consumers.

The principle with the cash back credit cards is really quite simple. As a credit card holder, chances are you use your card fairly regularly to make purchases in stores or online. Credit card providers allow you to benefit from your purchases by giving you a small percentage of the purchase amount as ‘cash back’. So essentially the more you spend, the more you will earn. The earnings are then credited back to your outstanding balance!

Student credit cards are becoming more and more popular, but your credit rating can be affected by your credit history, and using a website that provides free credit scores can help you monitor your financial well-being. Student credit cards are either designed for students or don’t require income, making them great first credit cards to establish credit history. A student credit card is one of the best choices for young people starting out with credit.

The travel/airline credit cards offer frequent flyer programs that provide cardholders with airline mileage credits. Frequent travelers can enjoy savings with a travel/airline credit card.

Rewards credit cards are the most popular type of credit card. There are several different types of rewards including travel, cash back and merchandise. Most rewards cards have an annual fee and high interest rates so it's best not to carry a balance with these cards. Get rewarded for everything you buy with rewards credit cards. Earn points to redeem for merchandise, gift certificates, travel discounts or cash.

A line of credit is any credit source extended to a government, business or individual by a bank or other financial institution. A line of credit may take several forms, such as overdraft protection, demand loan, export packing credit, term loan, discounting, purchase of commercial bills, etc. It is effectively a bank account that can readily be tapped at the borrower's discretion. Interest is paid only on money actually withdrawn. Lines of credit can be secured by collateral or unsecured.

Lines of credit are often extended by banks and financial institutions to creditworthy customers to address liquidity problems; such a line of credit is often called a Personal Line of Credit. The term is also used to mean the credit limit of a customer, that is, the maximum amount of credit a customer is allowed.

A Line of Credit is type of revolving loan with pre-approved credit limit, for a specified period of time. The line of credit gives the borrower flexible access to funds, whenever they need it. The funds available in the line of credit account can be withdrawn and used at any time during the life of the line of credit. The borrower can withdraw part or all available funds from his line of credit and they can also repay the funds back at any time. In some sense a line of credit is very similar to a credit card because as soon as you repay your balance in part or in full you can use the funds again. That’s why the lines of credit are considered revolving credit. A line of credit can be unsecured or secured by an asset owned by the borrower. With most banks you can access the funds in your line of credit by writing a cheque, using your bank card, and via telephone or online banking. Usually the financial institution you have opened line of credit with, will require a minimum monthly payment, which vary depending on the bank and the amount you have borrowed. The borrower has to repay everything they have borrowed on the line of credit on the maturity date of the loan.

Types of Credit Lines

The most well known type of line of credit is the personal line of credit. Many individuals have personal lines of credit usually with one of the banks. The money you have access to through your personal line of credit can be used for virtually anything – renovations, buying TV, paying for vacation, investing and even consolidating debt (you can draw funds from your line of credit to pay off credit card debt). The personal line of credit limits usually range from a few thousands to hundreds of thousands of dollars. Another type of credit line is the business line of credit, also known as operating line of credit. The business lines of credit are used by millions of small, medium and large business worldwide, to fund their day-to-day operations.

One of the major benefits of credit lines is the fact that they have lower interest rate compared to most credit cards. Using a line of credit is very convenient and in effect is no different than using your bank checking account – you can write a cheque, use online banking, telephone banking, and access the funds with your bank card in most cases. Another great benefit is that you can be flexible repaying your loan. If you have the funds you can repay everything borrowed on the credit line at once without a penalty. All in one a line of credit is a great way to have access to funds whenever you need it.

A credit line provides an opportunity to plan ahead for access to financing, even when the specific expenditure decisions have not been precisely identified. It differs from a loan that is applied for and approved for a single, specific purpose. It does not need to be used, or drawn down, all at once; rather, it can be tapped into as needed. Thus, a line of credit represents a ready source of financing for any business need or contingency that arises. It offers the borrower a high degree of flexibility to finance its current and forward needs.

A line of credit reflects the potential for a long-lasting relationship between the bank and the borrower, a relationship that benefits both parties. Indeed, the extension of a credit line means that the bank is determined to build a long-term relationship with the professional practice.

The advance commitment represented by a credit line enables the bank to work more closely with the borrower not only to lend money, but also to use its experience and status within the business community to offer advice and counsel, and to provide mutual referrals for new business relationships.

A bank line of credit may be the solution to any of the financial needs. A line of credit represents a commitment by the bank to lend the firm up to a maximum amount to cover a wide range of business purposes. Furthermore, some financial institutions will establish separate lines of credit for the personal borrowing requirements of individual partners.
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