Many people have less knowledge about how finances work and how they effect their lives. Credit cards are a large part of American life, but still remain misunderstood by many of those using them. However, knowing the way these tools work is very important. Just knowing your card works when you use it is not enough when it comes to credit cards. You need to know what your card can do for you. That starts with getting smart about which of the several credit card types is right for your situation.
Which Card Is Right For You
There are multiple categories of credit cards for the general consumer. The majority of credit card holders will need to determine what type of card, credit card limit, and what type of fees come with the credit card that you choose. Regardless of which category you find yourself in, always read the small print in the offer or contract before signing your name.
The General Consumer Credit Card
Consumers wishing to acquire a credit card from their bank are generally offered two options based on their credit history. Unsecured credit cards are ones that require nothing more than a favorable work and credit history. Secured credit cards require a deposit that matches the line of credit you’ll be given. This can make secured cards seem like debit cards. However, it would be a mistake to use a secured card like a debit card.
Banks use secured cards to help consumers rebuild their credit, which can be useful after a divorce, bankruptcy, or other problems showing on your credit report. Debit cards cannot do this, as they are based on only what is in the account when purchases are made. An unsecured card and a secured card act the same way when being used, although the secured card has a safety net in case the user defaults and cannot pay. General consumers have full protection under the CARD Act.
University Students Credit Cards
Many universities and colleges allow outside vendors to offer their students various goods and services on campus. Credit card companies and banks are often included on the list of those approved to do this. Interest rates are often lower than the general consumer’s typical credit card’s contract, but the amount available is also lower.
Students need to know that this credit card can either build their credit history report or destroy it. It is entirely dependent on how the student uses their card. Budgeting should be changed so that their new payments are included in their monthly expenses. Many students receive a large check a the beginning of each semester and many do not enroll over the summer. Funds should be set aside for the months when there is no funding from financial aid.
Business Credit Cards for both Large and Small Businesses
If you own a business, you can apply for a business credit card. While it is mainly for your business expenses, which can help separate personal and business finances for tax purposes, you will still be personally responsible for paying anything that your business defaults on. With higher credit limits, a business credit card can help pull a small business through rough spots that often cause the failure of many start-ups. Businesses are not people, they rarely are given full protection under the CARD Act. Some card issuers do provide basic protections, however, and have written these into their contracts.
Store Credit Cards or is it Really about Charge Cards?
Another group of credit card users is made up of those who shop at particular stores. Instead, these are considered to be charge cards and can only be used at the store or chain that issued them. In the case of charge cards offered at various stores, it’s a good idea to recognize that these are not credit nor debit cards. They can best be looked at as an electronic running tab that must be settled at the end of every month. Not paying the balance in full can incur heavy penalties, or even the loss of the use of the card.
Getting smart about credit cards starts with reading the fine print, and asking questions about anything you don’t understand. Many people have weak financial skills and bank personnel know this. They can explain the details of their individual offers, but any changes must always be made in writing to protect your rights.