|
|
Credit Cards For Dummies |
By:
Jason D. Barrett |
|
|
What is a credit card? I am sure most of you know what a
credit card is, but here goes. A credit card is a 3 3/8 inch x 2
1/8 inch plastic card with 16 digits on the front and a magnetic
stripe on the back. The card is issued by a bank for the
purposes of extending credit to the card holder for financial
transactions. The transactions are processed by Visa,
MasterCard, Discover Card, American
Express, etc. each time a transaction takes place. These
processing companies charge a percentage of each transaction to
the business owner of the company where the transaction
occurred. So for example, if you buy a $100 product from XYZ
Company, then XYZ Company owes the processing company a
percentage of the transaction. If the percentage fee is 6%, then
XYZ Company owes Visa $6.
Credit cards provide their card holders with a means to use
credit without having to apply for a loan every time they
need to borrow money. This ease of use is a definite
benefit to consumers and it is why many people use credit cards
for short term loans. Credit cards may also provide you
with incentives for making a purchase with their card. You may
see promotions such as 0% interest for one year, or 1% cash back
on all your purchases, or six months no interest if you buy this
weekend. They employ many different tactics to entice you to use
their card.
So what is in it for the credit card company or bank that issues
the card? Interest! You will pay interest on your balance
carried and it is typically not cheap. Most times it is easily
above a standard loan from a bank. The interest on credit cards
is usually figured by taking the prime rate, the rate that banks
can borrow money at, plus some amount of interest over and above
the prime rate. The added interest is based on several factors,
but most commonly your credit score. If you are interested in
today's prime rate you can find it by looking on the US Federal
Reserve website.
How can you get rid of credit card debt? There are
several ways to address credit card debt. One is to diligently
set aside your credit card payment each month and make sure the
bill gets paid on time. Late fees are very expensive,
they get added to your balance so they accrue interest on
themselves, and if payments are frequently late the credit card
company will probably increase the interest rate on your
account. A second method people use to pay off their credit
cards is to get a home equity loan and apply the proceeds
of that loan to your credit card balance(s). This will pay off
or pay down your balance and move the debt to your home where
the interest is lower than your credit card. Also the
interest on your home loan is deductible when figuring
your taxes so you will see some tax benefit as well.
For more information on credit cards and the companies that
provide credit cards simply run a search for "credit
cards" on Google and you will get plenty of addtional
information.
|
|
Article Source: http://www.friendsofvista.org/articles/article29591.html |
|
|
|
|
|
