When you need a loan, you may ask yourself, which loan is best for me , or what kind of loan do I need? There are many different types of loans, and each has its own particular use and also criteria to get approved.
When you need a loan, you may ask yourself, which loan is best for me, or what kind of loan do I need? There are many different types of loans, and each has its own particular use and also criteria to get approved.
You may think that when it comes to credit cards, they are all the same, but you would be incorrect in that assumption. There are different credit cards, while they all have the same basics, from there they can change and have different terms and usages.
Credit Cards Explained
Credit cards are a revolving line of credit that you can access by using the piece of plastic the card issuers provides to you.
Credit cards are good for online purchases, and for purchasing just about anything, as it allows to make a purchase without carrying around a large amount of cash.
There are those that think you have to have excellent credit in order to be approved for a credit card, and this is not entirely true. There are credit card providers that will issue credit cards to someone with bad, weak, poor, or no credit.
The card may start out with a low credit limit, and a high interest rate, but it is a start.
There are even exclusive credit cards offered to those that are wealthy and/or use the cards regularly for almost all purchases.
As a revolving line of credit, you the card holder are granted a line of credit, a maximum amount that you can spend using the credit card. As you make purchases on the card, you reduce your available line of credit. As you make payments, you increase your available credit back to the maximum limit.
Credit cards are good to use if you have an emergency, or need to make a purchase and don’t have the full amount of money at that time. You can then spread the payments out over time, however, if you only pay the minimum monthly payment, it will take many, many years to pay the credit card balance off.
By continuing to use the credit card while paying the monthly payments, it also makes it more difficult to pay the balance off.
When discussing credit cards there are also specific credit cards for certain stores, or store credit cards.
These credit cards can only be used at the specific store that issues them.
While store cards have a value and use, they are not as flexible and accepted in more places as a regular credit card issued by Mastercard or Visa can be. In addition, store cards can carry a higher interest rate. One positive aspect is that some stores offer discounts or additional savings to those holders of their store card when they make a purchase using the card.
Credit Cards and Bad Credit
There are some credit cards that are specifically for those that may have bad credit, or have experienced credit issues in the past.
These “credit building” cards have low credit limits and higher interest rates, but do allow someone who has no credit or bad credit to have a credit card and begin the process of rebuilding their credit rating and score.
Over time and using the card responsibly, a person can have their credit limit increased, and possibly later apply for and receive a lower rate credit card.
Prepaid Credit Cards
Prepaid credit cards are credit cards where you make a deposit into an account, and in essence pay your own credit limit.
If you pay £500 into the account, you have a £500 credit limit.
There are some accounts that will match your deposit, so a £250 deposit may get you a £500 credit limit.
You are essentially using your own money, but it is now in the form of a credit card. If you miss any payments, you are just using your own money.
The major drawback to a prepaid credit card, besides using your own money, is that many do not report to the credit bureaus. If the account is not reported to the credit bureaus, you do not get credit for it, so it in no way improves your credit or credit score.
Cash Back – Interest Free – 0% Interest
Besides the convenience of credit cards, some offer special savings and offers, such as cash back on purchases, loyalty points, frequent flier miles, etc.
If you are using the card to make a purchase anyway, these cash back and other offers are good, and can be used later to save money.
Having an interest free or 0% interest card just means you are not charged interest on your purchases, some just for a limited period of time, say 12 months. Then after that time period interest is charged at the usual rate.
A 0% period can be good to transfer a balance from another credit card, so you can concentrate on just paying the principal balance off and no interest.
Credit cards are a convenient way to make purchases, however with that we need to use them responsibly.