Having an idea of what's out there and how to choose
The world of money can be tricky for both borrowers who have done it before and those who have never done it before. By accident or on purpose, banks can make even the simplest information seem hard to understand. This can lead customers to choose products that might not be the best fit for their needs.
There are differences between credit, charge, ATM, and debit cards. You might think that a credit card and a debit card are pretty much the same thing because they are both ways to pay for things or get cash. However, they are very different. You should know what each card is and how it is different from the others if you want to use them well. Here are some facts that will help you make a good decision.
Charge cards
A credit card is a great way to pay for something. They are easy to get and easy to use, and there are many ways to pay them back. But if you keep a balance on your card, it can be like taking out a very expensive loan.
A credit card works like this: the credit card company gives you a card, and you use that card to pay for goods and services up to a certain amount, called your "credit limit." The store or service provider then gets the money you owe from the company that gave you the card, which you pay back. Then, each month, you can pay as much or as little as you want toward the balance, as long as you pay a minimum amount (usually 2.5 per cent).
At the end of each month, if you don't pay the full balance when your bill comes, you'll be charged interest, which can be as high as 25% or more per year, on the amount you still owe.
Credit cards are very profitable for the companies that give them out. Banks and companies that give out loans at a high interest rate make a lot of money, and in some cases, this is the majority of their income. In addition to interest, many credit card companies also charge an annual membership fee and a variety of other fees, such as late fees, over-the-limit fees, and other fees. Companies also make money when a customer uses a credit card in a store by charging the store a fee.
You can get three different kinds of credit cards:
Credit Cards without a security deposit
People with good credit history and a good credit score often get these cards. Most of the time, there are no annual fees and a low interest rate on these cards, and you don't have to put money in the bank to get one.
Credit Cards With a Higher Risk
Most of the time, these cards are given to people who have low-paying jobs or a bad credit history or score. Most of the time, these cards come with an activation fee and an annual fee that can be as high as $80.
Guaranteed credit cards
People with low-paying jobs and/or a very bad credit history and credit score are given these cards. Most of the time, the lender of these cards will ask for a deposit, which can be close to or equal to the amount of credit on the card. If the borrower shows that they are a good credit risk over time, the credit limit is raised. These cards also have high rates of interest and annual fees of up to $100.
Credit cards
Charge cards are a little different from credit cards. Charge cards are also called travel and entertainment cards. Most of the most popular charge cards, like American Express and Diners Club, have no limit on how much you can charge. Usually, you can charge as much as you want, but when your bill comes, you have to pay off the full amount.
There is one exception: if you use your American Express card to pay for airfare, cruise fees, or hotel charges booked through a travel agent, you can pay off your balance over 36 months. But there's a catch: you'll have to pay around 20% interest and a minimum of $20 each month.
American Express and other charge card companies make money by charging very high annual fees (up to $100) and by charging merchants high fees every time a customer uses their card to pay.
If you don't pay your charge card bill in full (unless it's an American Express card and the charges are for travel expenses), you have a grace period of one month during which no interest is charged. After that, though, you'll be charged interest, which is about 18% of the amount you owe. If you don't pay your bill after about three months, your account will be closed and your bill will be sent to the collections department.
Advances on money
Some people get cash advances with their credit or charge cards. This is a way to get cash, but it can be expensive. When you get a cash advance, most banks charge a transaction fee that can be as high as 4 percent. Even if you pay back the cash advance in full when your bill comes, you will still be charged interest from the date it was posted. Also, the interest rate on cash advances is usually higher than on other charges on a credit card.
ATM & Debit Cards
ATM cards and debit cards work a lot like credit and charge cards, but the main difference is that the money is taken right away from your bank account. You can't buy the item if you don't have the money.
Some people would rather do this because they like to keep track of what they spend and don't want to get into any kind of debt, no matter how small.
There are some bad things about debit cards. It doesn't give you the option to pay your bill in up to a month. You also can't refuse to pay with a debit card because the money is taken out of your account right away if you disagree with the merchant about the goods or services you bought. Some banks and stores also charge fees for transactions made with debit cards.
