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Almost everyone over the age of consent has or wants a credit card these days and they are accepted almost everywhere. There are three major types of credit card very common in America. The first main sort of credit card is travel and entertainment cards such as American Express or Diners Card. These have to be paid in full at the end of the month and are generous on spending limits.

The second major type of credit card is the bank card such as Master Cards, Visa, GM, and Ford cards sponsored mostly by the banks. The bank defines the spending limits, which in bank parlance, is known as the credit line and each offers different terms and conditions. Banks offer a choice of payment methods: either pay the balance in full with no interest or pay the minimum or some part of the balance with a finance charge.

The other major type of card is the retail store card, such as Sears, J.C. Penney, Shell or Mobil. These store cards and those from gas companies, widely known as fuel cards, are only accepted in specific countries. They usually do not have annual fees. There is a large variance in the terms and conditions for these cards.

The various types of credit cards offer different options. Some are designed for individual consumers, while others are set up in ways that work best for small business requirements. To know what kind of credit card fits your needs, you should look over a few options.

How to Choose a Credit Card.

Credit cards have become a part of life for most people living in the western countries. It’s becoming increasingly impossible to avoid them, especially for business men. So, if this is the first time you are seeking to enter into the world of plastic money, here are some of the basic things you should look out for.

First, compare the interest charged on all the credit cards you are interested in. While the rate may not remain fixed for ever, it’s always better for beginners to go for the one charging the lowest rates.

Make sure you study the fine print carefully, especially with regard to the other charges that can be made, like late-payment fees, annual fees, and whether there is a grace period.

You should decide what spending limit is most appropriate for someone on your income level. Furthermore, the fewer credit cards you use, the better placed you will be to understand your spending pattern.

Compare the services and other features such as the cash back incentives, or warranties, rebates and such like. Check whether the card is widely enough accepted to cater for your needs.

You should acquaint yourself with the following terms: 1] Annual Percentage Rate: this is the yearly cost of the credit. 2] Finance Charges: these are the total charges involving the transaction. 3] Period of Grace: This is the length of time the card issuer allows you before they commence charging you interest on your purchases. (Not all credit card issuers give a grace period).

If you are considering swapping or getting a Credit Card, have a look at the free advice on our website about using Credit Cards wisely.

Ask yourself: does the credit card work for you or do you work for your credit card? Most people’s response to that question will depend on how they treat their “plastic friend” as credit cards are often known. As many people with burned fingers will tell you, they didn’t realize that things had gotten so bad until too late, because most credit card offers try so much to sound like they are actually running a charity. Well, they aren’t.

And this is not a hate campaign against credit cards. They have their plus points - in America if you want to rent a car, you have got to have a (major) credit card. But, consider this scenario:

You get an offer in the mail that sounds good, maybe it’s a new television or refrigerator. But it costs $2,000. You have a credit card with a $5,000 limit, so you go out and purchase the product right away. Often, this is how your repayment schedule will work out. Most credit cards charge a minimum percentage of the remaining balance (usually 2 percent) per month. Assuming the interest rate is 18 percent and you choose to repay the minimum amount of $40, $30 of that will go towards interest and only $10 will come off the $2,000 you borrowed!

Does it sound worrying? Well, it doesn’t have to be. The moral of the story is to use the credit card very, very carefully.

Credit Cards Dos and Don’ts

There is a lot of truth in the saying that credit cards are not a substitute for not having money. Every time you use a credit card this should be the theme replaying in your head. And you would do good to remember the following too:

Dos.

1] Always plan for the purchases that you need and those that you just want. You need the essentials, but you only want everything else. The ability to differentiate might assist you plan more wisely.

2] If you are caught up in financial difficulties, it’s always a good idea to talk to the credit card supplier who might adjust your payments. If you just default, that only helps to build up an unfavourable credit history and you might find yourself being denied credit in the future.

3] Unless you are experiencing an emergency, staying within your credit limits will assist you a great deal. If you must spend over the credit card limit, keep within manageable levels, say within 30 percent.

4] If your mailbox is full of information on credit cards with more favourable deals than you currently are enjoying, you may approach your issuer for a better deal. They want to retain you as their customer, so they will listen.

Don’ts

1] Do not use your credit card to purchase household items. It is very expensive in the long term.

2] Do not only pay the minimum amount necessary. You will end up paying exorbitant amounts of interest. The more quickly you can pay off the debt the better.

3] Never use the credit card to buy items you can’t afford without the credit card.

If you are thinking onchanging or applying for a Credit Card, have a look at the free advice on our web site on using Credit Cards wisely.