Credit cards differ from debit cards in that each time a credit card is used for a transaction, the card issuer lends the card user the amount of money required to cover each charge to be repaid at a later date with a specified interest rate. Credit cards also differ from charge cards, where charge cards are repaid at the end of each month in full as opposed to in installments, or periodic payments, that can be made when a credit card is used.
To obtain a credit card, one must buy vcc first be approved by the card issuer and be eligible to receive the card. Often times banks issue cards through major credit card companies such as MasterCard, Visa, or American Express (Amex). Different credit card companies have different interest rates and policies, all of which should thoroughly be researched before applying for a card.
Credit cards have an advantage over debit and charge cards, since it is possible to charge virtually any amount within your credit limit even if you do not have sufficient funds to cover the charge. This amount must be repaid eventually, but can be paid over multiple months in small, interest-tweaked amounts. It is a good practice to repay all credit card bills as soon as possible, as the interest added to multiple small payments add up to a substantial amount in the long run.
Many merchants prefer credit card payments, as they are often more secure than cash or checks. When a purchase is made using a credit card, the bank which issued the card legally commits to pay all charges that were charged. This guarantees the company selling the product its money, and makes the cardholder responsible for repaying all charges to the bank.
All credit cards are assigned an initial credit limit. This credit limit states how much the cardholder may charge on their card until the fees are repaid. Often times new credit card holders will have a low credit limit, such as $500.00, and earn higher limits as their bills are repaid and their credit score rises.
Credit scores are numerical representations of credit card holders’ commitments to repaying their credit card bills. If a credit card bill is not repaid when it is due, the cardholder’s credit score is negatively affected. This ultimately results in a low credit score, which then results in the inability to do common things like purchase a home, buy a car or apply for a mortgage. Credit scores, in a way, are your “grade point average”. As in life when you apply for a job and show the employer your resume, almost every major purchase you make will require you to provide the seller with your credit score.