Credit Card – Best Credit Cards

Credit Card Use

There is a lot to learn managing you credit card or cards, plus you want to get the best credit to fit your needs. This article is meant to give a thorough overview of the particulars. Many people are drowning in credit card debt. Sometimes it is caused by extravagant spending but some people are using credit cards to live on, such as buying food and other essentials.

It is a vicious cycle if you are living off your credit cards because you are probably not paying enough each month to pay off the principal. Plus, it is probable you have a high interest on your credit card. It is imperative to change your lifestyle; if at all possible to get out of debt.

Shopping on Credit Cards

source allyou
source allyou

Credit Card Interest

Credit card company’s interest rate changes with the economy and currently the average is 14.87%. Some credit cards have much higher interest rates, so if you have good credit, shop around before applying for a new card. Companies can charge what they want, and this is legal.

There are other differences in cards as well. Some cards charge an annual fee, like American Express. Many reward credit cards are very popular, as the more you spend, the more reward points you earn. These points can be used for numerous things such as airfare, dining, cards for various stores and products.

Credit card balance transfers are also quite common. I get blank checks in the mail frequently that offer a low interest with usually an end date a few months away if I will do a credit card balance transfer. Sometimes this may be a good deal if you know you can pay off the balance in the allotted time frame. Some companies offer an introductory APR typically extending for six months, but then there is a significant raise. Always read the fine print.

Truth about our Credit Cards

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source creditall

Types of Credit Cards

When people are trying to establish credit they sometimes get secured credit cards which means they usually pay $500 to the bank, which is placed in a type of savings account. The card has a top spending balance is $500. Over time if the individual makes on time payments they will establish credit and eventually get their $500 back.

Some credit cards require that you pay off the whole balance each month such as American Express, but there is no finance charge and sometimes no limit on expenditure. However, you do have an annual fee.

Revolving credit is more common and would include Visa, Mastercard, Discover and Optima. This means you can carry a balance on which you are charged interest, plus they require a minimum payment monthly. It is typically about 5% of your balance or a minimum of $10. These are no fee credit cards.

Sears credit card or a J. C. Penney’s card is typically a revolving credit card and they are also no fee credit cards. You can now also purchase prepaid credit cards as a gift.


Calculating Interest

Financial institutions use three different ways to calculate finance charges:

  • Adjusted balance - This system, which consumer experts say favors the cardholder, takes the balance from your previous statement, adds new charges, subtracts the payment you made and then multiplies this number by the monthly interest rate.
  • Average daily balance - This method, which is a pretty even-handed one and the most commonly used, and works like this: The company tracks your balance day-by-day, adding charges and subtracting payments as they occur. At the end of the period, they compute the average of these daily totals and then multiply this number by the monthly interest rate to find your finance charge.
  • Previous balance - This method generally favors the card issuer, according to consumer experts. The issuer multiplies your previous statement's balance by the monthly interest rate to find the new finance charge. This means you're still being charged interest on your balance a whole period after you've paid it down!”


Percentage Comparison

The balance determines what you will pay; meaning the interest rate and the way your finance charge is calculated. For example, take a high-card rate that you charge a $1000 on a 23.99% credit card and then don’t charge anything else and make minimum payments monthly. The payment starts at $51 and slowly works its way down to $10 which means you will make 77 payments over the next 6 years, paying $5733.59 in interest.

Now another example of a low-rate card has you charging the same $1000 amount on a 9.9% fixed rate card. The minimum payment will start at $50.41 and go down to $10. You will make 17 fewer payments, finishing in 6 years and paying $176.in interest which is a savings of $400. This gives you an idea of how important your interest rate is and also how long it takes if you always make minimum payments.


Extra Fees on Credit Cards

Other problems that are quite costly are late fees and over-the-limit fees. These are newer charges but most cards have them now. Issuers typically will bump your interest rate up to 23.99% after a specific number of late payments. Always read the fine print on letters they mail to you as you may not be aware of their policies otherwise. The company may charge you the inflated interest rate for the term of the account once you have those late fees. All companies report your payment record to credit reporting agencies, and a few late payments can stop you from financing a house or a car.


Watch Your Bill for Mistakes

Carefully check your credit card bill each month to make sure the charges are all legitimate, to check for any finance charges, late fees or over-the-limit charges to make sure they are justified as they do make mistakes. The Fair Credit Billing Act does apply to credit cards but not debit cards which mean you have 60 days to dispute a charge that is incorrect. Many errors can be resolved over the phone; however, you may write a letter with your name, account number, date and amount of the disputed charge. Do not send a payment and send it certified mail to prove it has been received. If it is determined that there was an error the credit card company will remove the charge and any interest or late fee associated with the error.

Drowning in credit Cards

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source quizzle

Lenders Look at Your History

This is what the lender looks for when determining if you qualify for a credit card:

  • Good payment record.
  • Control of debt load, in other words not living above your means.
  • Signs of stability, such as longevity on your job and in your home.
  • Lack of credit inquiries. All inquiries stay on your credit report for two years. Lenders perceive numerous inquiries a poor risk.
  • Lack of available or unused credit. They advise you to get rid of cards you don’t use. I learned this earlier this year and I have a couple of cards I’ve had for a very long time and seldom use, but I didn’t want to cancel them. So I charged something on both of them and will do that a couple of times a year. I did close two other accounts as it is looks better on my credit for me to close an account I am not using than the company canceling my credit card.

Summary

I use Quicken to track my finances and when I buy something even on credit I put it in the Quicken program as a current purchase. Then, when the bill arrives, I pay the bill in full, erase the credit card amounts in Quicken and it doesn't change my bottom line. That way I always know how much money I have to work with, and I always pay all credit cards off when the bill arrives. We live on a budget, so this helps me always be aware of the bottom line. I found that I am more aware of what goes out during the month by using this little trick.

Each person has their own way of handling their budget, but the most important thing is to have a budget and some long term goals. If you have a lot of credit card debt, make a plan to get it paid down. You will sleep better at night!

© 2011 Pamela Oglesby

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Comments 27 comments

rpalulis profile image

rpalulis 5 years ago from NY

I think credit cards are only good if you know how to use them. Credit Card offers are a dime a dozen and it is good to let them know that too. I have called my credit card co. before after realizing that my interest rate was increased. Having perfect credit and no credit card debt, I just simply let the customer service rep. know that they would be loosing a loyal customer of over 12 years, I actually got even a lower interest rate!


iamalegend profile image

iamalegend 5 years ago from EARTH

Credit card is a very essential gadget in these days. But choosing the right credit card is very difficult. Every company offers different types of plans.Now I'm using VISA credit card.It is very good.


oceansnsunsets profile image

oceansnsunsets 5 years ago from The Midwest, USA

Great hub on credit cards and credit, Pamela. Thanks for sharing.


onceuponatime66 profile image

onceuponatime66 5 years ago from USA IL

I think high school age kids need to learn this in depth.


daravuthz profile image

daravuthz 5 years ago from Cambodia

You had a good hub about Credit card. I learn some new things from your hubs. Thanks for sharing.


Moon Willow Lake profile image

Moon Willow Lake 5 years ago

I agree with onceuponatime66. In middle school, I was set to take a class about finances and real-life how-to's when it was suddenly canceled due to "lack of interest from other students." How sad because I believe those types of classes should be mandatory. Thanks for the good info PAMELA99.


carolina muscle profile image

carolina muscle 5 years ago from Charlotte, North Carolina

I got rid of most of mine.. I keep a couple for travel... otherwise, I hate em!!! Nice post!!!


katrinasui profile image

katrinasui 5 years ago

Pamela, nice hub. i have learned something new today.


stephhicks68 profile image

stephhicks68 5 years ago from Bend, Oregon

Hi Pamela, this is a super overview of credit card rules, how they work, and how they can impact your credit. Very helpful and useful. Wishing you good luck in the contest - super entry!


Pamela99 profile image

Pamela99 5 years ago from United States Author

stephhicks, I am glad you liked the hub and I appreciate your comments.


lctodd1947 profile image

lctodd1947 5 years ago from USA

Very useful and to the point. Credit card debt is what is killing so many people's financial status. It is usually the first thing they do not pay when they get into trouble and of couse their credit rating is affected.

Thanks for sharing.


HealthyHanna profile image

HealthyHanna 5 years ago from Utah

This is something they need to teach in school and ban from college campuses. Credit cards can be your friend or your greatest ememy


Pamela99 profile image

Pamela99 5 years ago from United States Author

IcTodd, That is exactly by take on the credit problems. Thanks for your comment.

Hanna, I couldn't agree with you more. I appreciate your comment.


Simone Smith profile image

Simone Smith 5 years ago from San Francisco

Oh my gosh, a 79.9% interest rate??? That's horrifying! Thanks for sharing this interesting information - even if it's scary, it's good to know!


Pamela99 profile image

Pamela99 5 years ago from United States Author

Simone, It is scary to me also. Thanks for your comments.


akirchner profile image

akirchner 5 years ago from Central Oregon

My daughter-in-law has a terrible time with credit and spending, spending, spending. It's a sad thing but sometimes we have to learn the hard way. Great information!


Pamela99 profile image

Pamela99 5 years ago from United States Author

Audry, Many people seem to have a hard time and they really should cut up their cards in my opinion. I guess she will learn the hard way. One of my sons had a couple of bad marks on his credit and when he cleared them up he won't charge anything he can't pay for immediately as he hated having poor credit so much. Thanks for the comments.


Hello, hello, profile image

Hello, hello, 5 years ago from London, UK

Credit Cards can be so deadly.


Pamela99 profile image

Pamela99 5 years ago from United States Author

Hello, It really takes discipline when using credit cards. Thanks for your comment.


Support Med. profile image

Support Med. 5 years ago from Michigan

They say credit cards are a major reason for our American money losing its value. Card vs. actual cash money. Why do we seem to ask for the things that are not good for us as a whole, individual or country wise. v/r


Pamela99 profile image

Pamela99 5 years ago from United States Author

Support Med, It seems to me that people want to buy whether they can afford it or not. Thanks for that question. I wish I had a better answer.


chamilj profile image

chamilj 5 years ago from Sri Lanka

I think if you use credit card you should use it carefully. Try to pay your card bill in full every time.


Pamela99 profile image

Pamela99 5 years ago from United States Author

chamilj, I agree with you completely. Thank you for your comments.


stars439 profile image

stars439 4 years ago from Louisiana, The Magnolia and Pelican State.

Helpful information concerning credit cards. It is too easy to get in debt with them. God Bless you Precious Heart.


Pamela99 profile image

Pamela99 4 years ago from United States Author

stars, Thank you so much for your comments. God Bless.


Kurt Ratliff 4 years ago

Another thing I have really noticed is that often for many people, low credit score is the response to circumstances above their control. By way of example they may have been saddled having an illness so they have substantial bills for collections. It would be due to a work loss or perhaps the inability to work. Sometimes separation and divorce can send the money in the wrong direction. Many thanks for sharing your opinions on this site.

http://www.debteliminationstrategy.blogspot.com/


Pamela99 profile image

Pamela99 4 years ago from United States Author

Kurt, Those are all certainly credible reasons for credit problems. Thanks for your comments.

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