How to Use Credit Cards Sanely

How to Use Credit Cards Sanely

Not an awful lot of sane thinking seems to prevail when it comes to use of credit cards. In 1992, in the U.S. alone, the national credit card debt was $273 billion. Today it has ballooned to more than $800 billion. Statistics show that the average Americanhousehold has over $9,000 in credit card debt.

Indeed, a majority of the U.S. population, at some time or another, will have a problem with credit card debt or their credit score. There is a lot of confusion and misunderstanding about credit cards and how to use them in a rational and responsible manner.

Today, you'll hear a great deal about debt consolidation, credit counseling and the like. With the recent tightening of the Bankruptcy Laws, relief from credit card and other debts is not as simple as it once was. Consequently, it's well to have a clearer understanding of how to use credit cards sanely, and how to avoid building up unmanageable levels of debt.

All too often people use credit cards without a clear idea how mounting balances will be paid back fully in a timely manner. Just call us, the credit card nation. Our motto used to be "Save for a rainy day." Now we say "Borrow today...pay back, whenever".

Here you'll find a series of informative articles to help educate you and provide ideas and guidance about many aspects in dealing with credit cards and and managing credit card debt. A selection of pertinent articles is posted below.

Welcome to the Credit Card Advice Guide

Credit cards are one of those modern conveniences that we seemingly cannot do without in this day and age. Everywhere you go more and more people are whipping out the plastic to pay for their purchases, when once upon a time they would have laid out a pile of cash. Credit cards are convenient, indispensable and impossible to live without…or are they?

While it is true that credit cards offer consumers numerous advantages over cash and checks, they have a number of disadvantages as well. Of course a lot of it depends on the particular user, but even in the best-case scenario with the best of intentions, credit cards can be more trouble than they are worth.

One of the more obvious advantages of credit cards is that they allow you to purchase products and services in a pinch even if you do not have enough cash–or any at all, for that matter–with you. Let’s say you have a medical emergency or your car breaks down, and you have no way of getting to a nearby ATM. Without a credit card at hand, you will be totally out of luck and will have to either depend on the kindness of strangers to get you through this emergency or possibly rely on your bargaining skills…and let’s face it: without cash or a credit card at hand, you don’t really have much you can bargain with.

On the other hand, having a credit card with you at all times also means that if you come across something that you want, but do not necessarily need, you are more likely to fall victim to what is commonly called impulse buying. Far too many people whip out the plastic too quickly on the spur of the moment when faced with something that they “must absolutely” have, and it is this situation that has forced so many people into credit card debt land. Another benefit that credit cards can give you is offering you protection against theft of your cash. Of course there are unfortunately such criminal elements as credit card thieves, but there are ways that you can prevent the use of your credit card once it has left your possession. In any case it is still much harder for a thief to benefit from a stolen credit card than from ready cash.

A further advantage to credit cards, and one that can have a lasting effect on your financial future, is that using a credit card responsibly–that is to say paying your bills on time and avoiding building up too much interest–can actually build up a good credit history. This will come in useful later on when you want to purchase a car or a house for example. If you can show a lending institution that you are able to manage your credit cards effectively, they will be more willing to grant you a loan.

Web Credit Card Review Presents: Total Credit Allowance

Web Credit Card Review Presents: Total Credit Allowance

So you are new to the credit card market. Do you know how to maintain that credit and help build more? The secret is to use your credit wisely and to understand how the credit card companies determine your credit allowance.

First of all, based on your history, there is a set amount of credit that you have. This is a total amount of available credit. This means that no matter how many loans you have, there is a certain dollar amount that will not be exceeded by those loans. As an example, if we take Sherry, and Sherry has 3 credit cards and a car loan, and she has a total credit of $30,000, then her total limits on her cards and her remaining balance on her car loan will not exceed that $30,000.

Everyone has a number that they are worth to the credit card companies. This number represents the amount of debt they believe you can hold before it will overwhelm you and you will be unable to pay. They are betting that if you owe this amount or less, that you will chose to pay it instead of defaulting or declaring bankruptcy. So if Sherry has a car loan still worth $12,000 and three credit cards with $5,000 limit on each, she has a total credit liability of $27,000.

If she applies for a new credit card, the highest limit she can get would be $3,000 and she will not be able to get any more loans on her credit, even if all of the cards are paid off. It works this way because the credit card companies know that you have the credit available and if your limits added up to an amount above your credit threshold, you could get yourself in too much trouble. The credit issuers know that if you do default or declare bankruptcy, they won’t get their money.

So when you are applying for a new credit card, car loan, or mortgage, you should make sure you don’t have a large amount of outstanding credit before you apply. This means closing unused accounts and paying off low balances to be able to close those accounts as well. This will free up some of your credit and make it much more likely to get the loans or credit you want.

Remember to choose your credit cards wisely - and thanks for visiting Web Credit Card Review!

Credit Cards

What is a Credit Card?
A Lot of people miscomprehend the usage of credit card thinking that it only augments their expenditure & nothing else, however they are not aware of the proper usage of the card. A Credit Card is plastic money which is used as a way of payment, facilitating you to purchase products/services on credit. It eases your life & your shopping experience is made simpler as you are not required to carry cash at all the places; just swipe your credit card & you are given a free credit period of 50-55 days by the bank. A lot of people think that the credit period starts from the date of purchase which is not correct; you should note that the credit period is calculated from the date of billing and not from the date of purchase. Get more information on credit card pin, credit card eligibility and Rejected reasons for credit card at Articles about Credit Card.

Benefits of Credit Card
1) Free Credit Period : Firstly the Credit Card offers you a free credit period (of 50-55 days) from the date of the billing cycle which helps you to purchase on credit without any hassle of carrying cash, thus making your shopping much easier.
2) Online Shopping : The Credit Card helps you to buy products/services online or over the phone thus helping you to purchase anywhere 24x7.
3) Advantage of various Branding offers : Most importantly credit cards offer various discounts & schemes which are associated with entertainment, travel, shopping etc. Issuing Credit Card Banks tie up with the reputed brands to sell products/services at attractive rates which you can buy through your credit cards. To check offers running on your credit card.
4) Borrowing cash through credit cards : You can also withdraw cash through ATMs at any time.
5) Credit Cards also offer reward points on purchases which you can accumulate and redeem later with cash backs & attractive gifts etc.

Compare credit cards
There is a plethora of credit card choices available in the market which would simply clutter the process of choosing your card, so before you opt for a card you must evaluate the card features on the basis of following points:

• Interest rate: The interest rate is levied by banks whenever you revolve your outstanding balance into your next billing cycle; it ranges from 2.79 - 3.9 per cent per month varying from bank to bank. Go with the bank which has the cheapest interest rate.
• Identify a card suiting your needs & where you spend the most : Search for a card which serves your needs & the areas of your expenditure should match the type of the card, e.g. if you are an overseas traveler you can look at a Global card which can be used for paying expenses in foreign currency and offering 24-hour travel bookings around the globe.
• Annual Fee, Joining Fee & other features : You should review the features of the cards available; make sure that the card offers maximum features such as zero annual fees, zero joining fee 24-hour helpline & good reward points program.
•Grace Period/Interest free Period : It is that period offered by banks during which they don’t levy any charges, the period is between the statement date and the due date of payment. It is normally between 15 to 20 days and varies from bank to bank. You must look for a card which offers maximum grace period.
• Look out for various kinds of rewards & lucrative offers : There are various cards which have a reward structure offering rewards in the form of flier points while purchasing a specific good/services & these points can be redeemed for attractive gifts & cash back offers. Card companies offer certain credit cards which come with the high annual fee and offer luxurious services like hotel accommodations, concierge services for 24X7 travel bookings around the globe.

Balance Transfer in Credit Card - How does it help?
What is a Balance Transfer?
It is the process of transferring the existing outstanding balance or debt from one credit card to another credit card.

How does it benefit?
It benefits the card holders when there are high interest rates on their existing cards as against the other card on which the balance is transferred. This facility helps those who are not satisfied with the services by the existing card company like incorrect billing, non-receipt of the card bill etc. thus switching from one card to another offers the card holders with low interest charges or sometimes 0% charges & other services.

Balance Transfer interest rates
Most of the banks offer low interest rates or sometimes even zero interest on balance transfer on credit cards ; however you should note that these rates are applicable only for initial period (3-4 months), post that the bank will start charging you at the same rate what your preceding card company charged you.

Credit Limit
The balance transfer reduces the credit limit of the second card to the balance transferred amount. You must note that the transferred amount should not exceed 80 per cent of your credit limit.

How to use Credit Cards wisely?
The Credit Card should be managed cautiously & judiciously so that you can fully enjoy the free credit period of roughly 50-55 days without any worry.
Let’s understand your credit card by an example, for instance if Sunil makes a purchase worth Rs. 8,000 using the credit card in the month of January, but pays back only the minimum amount due (say 5%) of Rs. 500, then further he makes purchases in the month of February worth Rs. 7,000. At the time of payment of his credit card bill he would be paying the previous balance of Rs. 9500 & the new purchases of Rs. 7000 together get charged with the interest of 36% p.a. You should note that making a partial payment & forwarding the credit to the next billing cycle is called revolving credit & in this case Sunil is called a Revolver in the banking terminology.
To avoid such high interests on your purchases pay the entire outstanding payments before the due date. Moreover if you don’t pay the minimum balance (of Rs. 9500) you are slapped with another charge called the late payment fee of around 2% together with the interest.

Important pointers for Credit Card holders
- As soon as you get the credit card, you need to sign on the signature panel - Spend within your credit limit: You should not cross the limit of the credit allotted by the bank as they charge hefty fine from the card holders. - Always check sales vouchers/charge slips and the purchase amount when you sign them. - Change your PIN regularly & do not give out your card number or CVV number (three-digit number) to anyone on the phone, unless you are dealing with a reputable company. - When shopping online, submit credit card details only through secure websites. - Always keep a track of your billing cycle & pay bills on time to avoid interest charges & late fees. - Always scan your credit card statements for unauthorized transactions. If you've been defrauded, contact the issuing bank instantly. - Withdrawing cash from ATM through your credit card is really expensive as there is a fee of Rs 350, plus 3.5 percent interest per day. You must make sure that you withdraw the cash only in an emergency.

How does Credit Card work?
Before we discuss about the credit card process, let’s first look at the players involved in the credit card business:
Credit Card Holder : The person who is issued a credit card, who actually holds & uses it. He purchases various things through the card & pays the borrowed money later within a scheduled time to the bank or the company.
Merchant/Shop-keeper : The person who accepts the payments from the card holder through the swiping of the credit card in return of the transaction.
Card Issuing Bank : It is the bank which has actually issued the credit card to customers & offers credit to them on transactions made by the card holder.
Acquiring Bank: All the transactions made using the credit card is done through the acquiring bank. The merchant pays a fee to the acquiring bank for the signing of machine & other services.
Credit Card Network : This is that network which helps facilitate the card transactions such as Visa or Master Card.

Credit Card Process
The process starts with the swiping of your card on the merchant’s card swiping machine which has been provided by the acquiring bank to him. As soon as the card is swiped; the transaction is checked & verified by the card issuing bank whether the credit card is eligible for the requested amount of credit. Once the card holder is verified for the credit, he signs the charge slip which is forwarded to the acquiring bank and closes the transactions with the merchant; further the acquiring bank settles the transactions with the issuing bank.

Banks earn in two ways, firstly by the fee paid by the merchants for enrolling the services (machine etc.). Secondly from the card holders who default by not paying the entire outstanding balance before the due date.

Credit Cards help in day-to-day transactions of goods & services offering a free credit period provided the card holder pays the outstanding balance within the grace period; otherwise the card holder has to pay interest charges & late fee if the payment is made after the due date.

In nutshell buying through credit cards really benefit till the time you pay your card bills on time, or else it will turn out be very expensive.