This article, published August 5, 2009, contains 765 words.

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Plastic! Such an easy way to buy. Pick the TV of your choice, Hand your plastic card to the store salesperson and you're done. All that's left is to go home, enjoy the TV, let everything else go and then in two, three or maybe four weeks pay the bill.

Love those plastic cards
Most plastic payments are handled with:

• credit cards - allow purchasing or getting a cash advance with less than full balances paid on the due date,
  
• debit cards - allow purchasing or getting a cash advance with each transaction amount taken from a bank account immediately,
  
• charge cards - are similar to credit cards but the full balance must be paid when due,
  
• Electronic Benefit Transfer (EBT) cards - are authorized by the government for individuals needing financial assistance to pay for qualified transactions such as groceries.
  

Credit cards
After working six years in the credit card division of a large bank, I know a little about credit cards but less about debit, EBT, and charge cards. However, after being out of the business for two years now, I should tell you I know less about credit cards than I did. But, I will point out a few "things" you might not know.

In a nutshell
Credit cards are issued mostly by banks and credit unions to anyone who qualifies whether or not they are a customer of the issuing institution. When a person uses the card for purchasing, say, a camera, the merchant sends the purchase information to the card issuer with some intermediate steps along the way. The merchant then receives payment from the card issuer. The issuer then asks the purchaser for payment.

The main points a card holder needs to understand are:

• due dates,
  
• interest charges,
  
• cash advance fees,
• over limit fees and
  
• balance transfer fees.

There's a whole lot more involved in a credit card system. A large bank will have thousands of employees to maintain a system because of all the rules, regulations and procedures. To give you an idea of the complexity, customer service representatives typically go through six weeks of class room training. Other departments will typically train their representatives from one to three weeks.

The Card Agreement
Everything you need to know about credit card usage and interaction with the bank regarding your credit card is discussed in the Card Agreement. The agreement is full of legalese and fine print. It isn't easy or fun to read. My advice is don't even try reading the agreement but do familiarize yourself with the categories of its contents. And, know where to find the agreement when you need it.

Acceptability
Most merchants accept MasterCard and VISA, the most common of the credit cards. Some merchants do not accept credit cards because of the fees charged to merchants, which varies around 2% of the transaction amount. Some merchants do not accept credit cards unless the transaction exceeds a certain amount. Then, others accept credit cards for all transactions in the interest of good customer relations.

Paying the credit card bill
When the bill comes due, it is best to pay in full and not later than the due date. Payment in full will save you the cost of interest which can be steep, depending on the interest rate and the amount owed. Payment by the due date will save you the cost of a late fee, also steep. The amount of a late fee is set by the issuer and you should expect to pay $35 or higher. A late fee will lighten your wallet for sure.

Other fees:

• Balance transfer - When you use your credit card to pay off another debt (transferring that debt to the credit card) the issuer of the card may charge a fee calculated as a percent of the amount or a flat amount. Sometimes they do not charge a fee.
• Over limit - The issuer will likely charge a fee if you exceed the authorized limit by a certain percent.
• Cash advance - Be very careful here because the interest charged for cash advances can be two or three times the amount of interest charged for purchases.

A Tip
Card issuers almost always have customer service available 24 hours a day every day of the year. You will find the customer service phone number on the back of your card but keep the number somewhere else too so you can call customer service immediately if you lose your card or suspect it has been stolen.

OK. Congratulations! You have just finished the first hour of Credit Card 101.

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Larry Croft is a retired credit card fraud investigator.