Credit cards have become a necessity for some people in society. Why not? They help out a person extend his cash flow more. If you are in a tight fit and would need to use cash, the credit card can be your answer.

Because of the nice sounding concept of extending the cash flow those credit cards give. People often fall into their trap too. People often become tempted to overuse their cards and not be able to pay off the debt.

Credit cards can be very helpful. But a person who has a credit card must know to use it wisely. The user must learn to avoid the pitfalls or certain charges that can make the use of credit cards burdensome. Here are the costs that you must try to avoid from credit cards.

Grace Periods:

The grace period is the time given by the credit card companies to a card user to pay off the debt past the due date without additional charges. Grace periods was more often used by the card companies in the past. Now, card companies are charging fees for a minor time or day of payment delayed.

Before, when you charged the maximum on your card but were able to pay it off before the end of the grace period, there will be no extra charges. Now companies have reduced the grace period of 25 days and some even removed it.

Remember that the purchase you make today will be accrued immediately. So check the contracts of the card you are about to get. If there are no grace periods before the interest will build up, find another card company.

Late Fees:

Always know how much the late fees will cost you. This is because late fees can be the real burdensome fees. Card companies are making more money out of you because they have increased the late fees and removed grace periods.

So it is important, if possible to pay the bill immediately once you receive the card statement. Aside from paying large late fees, they will also report it to credit bureaus and will have a bad mark on your credit rating history or score. The card companies may also raise the interest rates you have when you don’t pay on time.

Bottom line is to make better use of your credit card by avoiding paying those late fees and reading the contracts carefully.

You may freely reprint this article provided the following author’s biography (including the live URL link) remains intact:

About The Author

John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

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Sometimes the process of getting a credit card seems mysterious. Occasionally, people who have been granted a $20,000 loan (e.g., to buy a car) are then rejected for a credit card with a $5,000 limit.

This can be confusing. The misunderstanding arises because most people see a credit card (which is revolving credit) as being the same as a personal loan (which is instalment credit). These two types of credit have very different characteristics and are treated differently by financial institutions when they are determining whether or not to approve your application.

While an instalment loan is for a fixed dollar amount and term with a regular payment schedule, a revolving credit account, such as a credit card, is open-ended and may be used whenever you want for a variety of purchases or a cash advance. As well, credit cards are generally completely unsecured. (Some are secured and we’ll look at these later.)

While most people don’t see the difference, statistics show that people treat them quite differently when it comes to repayment. People’s priorities in terms of repayment are usually:

1. mortgages
2. installment loans
3. revolving lines of credit, such as credit cards

This means that should your financial circumstances change, you will be more likely to make your mortgage and instalment loan payments than your credit card payments. So credit cards run the highest risk of default. As a result, financial institutions consider all the information on your credit application very carefully before giving you a card.

Credit cards offer people what appears to be easy credit. With minimum payment requirements, credit cards can actually be detrimental to your credit rating if misused.

Some people don’t even think of using a credit card as borrowing. After all, there’s no long approval process each time you want to charge something. You just charge it and cachunk, cachunk. That’s why financial institutions are so careful. That’s also why credit limit increases are only considered once you have demonstrated an ability to manage your current limit. And that’s one reason the interest rate charged on a credit card is so much higher than on other forms of credit. The second reason is fraud.

Credit card issuers experience enormous problems with fraud. They have to cover their losses in some way, and a higher rate of interest is one way to do it. Perhaps if the use of a Personal Identification Number (PIN) or a photo ID on the card becomes a standard, issuers will see fraud costs drop and we will benefit with reduced interest rates. But that’s the future.

Most financial institutions use a sophisticated tool to help make the best credit-granting decision. Referred to as “credit scoring,” the system assesses a number of items on your application form and gives you points for each item based on the institution’s past experience with similar customers. The points are totalled to obtain a credit score. Using credit scoring, the credit decision is based on a combination of factors, rather than just one or two factors. Customers who meet the minimum score requirement are granted a credit card and assigned a starting credit limit.

To learn more about managing your credit and finances visit http://www.crediteria.com Offering sound financial advice and free newsletter service to keep you informed.
Up-to-date reviews and information can be found at our Credit Chat blog http://www.crediteria.com/CreditChat/

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Have you ever wondered what a credit card is? A credit card is a card made from thin plastic, usually 3-1/8 inches by 2-1/8 inches in size, containing identification information such as a signature or picture, which authorizes the named person to be periodically billed for purchases or services made to his account. Information on the card is examined by automated teller machines (ATMs), store readers, and computers from banks and the Internet.

The use of credit cards began in the United States in the 1920s, at a time individual establishments, such as hotels and the oil industry, started issuing them to customers for purchases made at those businesses. This use improved significantly after World War II.

In 1950, Diners Club introduced the first universal card which could be used at different stores and businesses. Cardholders were charged and billed annual and monthly fees. American Express followed suit in 1958.

The bank credit-card system followed much later. Upon receipt of sales slips, the account of the merchant is credited by the banks to be paid by the cardholder at the end of the billing period. The balance is either paid in full or in monthly downpayments with interest at the discretion of the cardholder.

The first statewide national bank system was BankAmericard which began in 1959 by Bank of America in 1959. It was granted its license in other states beginning 1966 and was later known as Visa in 1976.

MasterCard, previously MasterCharge, followed. Smaller banks offering credit cards locally as well as regionally merged with large national or international banks in order to offer expanded services, such as meals and lodging.

Have you ever experienced being behind someone in line at the store shuffling through a stack of what must be at least 10 credit cards? Experts revealed that many U.S. citizens have at least one credit card. Indeed, credit cards have become valuable resources of identification. When widely used, a credit card can afford convenience and permit you to make purchases with almost a month to pay for them before being charged with finance charges.

Theoretically it sounds good. The truth is that many consumers are powerless to fully use these advantages because they are burdened with credit card balances every month, paying finance charges that can increase to a whopping 23 percent. It is quite irresistible for many to use the old “plastic” for purchases on impulse or buying things which are unnecessary. The numbers are alarming: In 1999, American consumers charged about $1.2 trillion on their general-purpose credit cards.

You may freely reprint this article provided the following author’s biography (including the live URL link) remains intact:

About The Author

John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

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