Credit card

 

Long gone are the times where the only way to pay at a store was with cash. In fact, the times when the only place you could buy things was a store are long gone as well. Today, there are a bunch of ways you can pay for your purchases and you can even go shopping with a few simple mouse clicks online. One method of payment for your expenses is the credit card, be it a Visa card, a Master Card or an American Express card – they all work the same way.

How do they work?

A credit card actually works in a quite simple way. By obtaining one, the user agrees to pay the issuer back the cost of any purchases made using that credit card. So, basically, the user can spend the money the issuer lent them, up to a certain limit, with that credit card. The user has to pay some, but not all of the money back monthly. They are sent a bill each month where all the expenses made using the card show up. Then, the issuer demands a certain percentage of the money spent that month back. This is the minimum amount the user then has to pay back, but they can of course exceed it, paying back up to the entire sum they owe the issuer. In some cases, arrangements are made to deduct the entire sum the user owes from their other bank accounts, so long as they have sufficient funds. If the user chooses to carry the debt with them to the next month, then interest rates will apply. So, what happens is, once you have your credit card, you walk into a store, shop to your heart’s desire (well, almost), and then you tell the cashier you would like to pay by credit card. You will then be required to either enter a PIN or sign a slip saying that you agree to pay the lender back the amount of money you are about to spend. The huge advantage of credit cards is that most credit cards are universally accepted. If you were to go on holiday you would not need to change any cash or worry about foreign currencies or exchange rates, it would be sufficient to just say you would like to pay by credit card and the rest would be taken care of for you electronically. Similarly, if you want to order something off the internet, say, off a European site if you live in the United States, it would be very easy for you to just pay for your purchase by credit card and thus shop from home without any further problems.

How do I get one?

Firstly, what you should do is see what different companies have to offer you and what credit card you think would bring you the most benefits. Compare all offers, but you should also make sure you apply for a credit card with a well-known reputable company, not only for the obvious reason that it will be safer to trust them, but also because the larger the company that issues your credit card, the likelier the card is to be accepted everywhere, and what would be the point of getting a credit card if you found that you could pay almost nowhere with it? Look out for low interest rates especially, since credit cards generally tend to have higher interest rates on them than other forms of loans. Consider your options carefully and see what company you would like to be your lender before you apply for a credit card. Your application will be processed, and the company will of course review your request based on your current financial situation. If they decide that they think you can afford to pay back a certain amount of money every month and if your financial situation is able to convince them that they will actually get their money back, then you are likely to be granted a credit card.

A credit card is a very useful thing to have and if you do not have one yet, you should definitely consider getting one. However, as will all kinds of loans, do be careful that you do not build up too much of a debt and seriously consider whether you personally think you will be able to cope with paying off the loan. An alternative would be a debit card, which you can also use for payment online or in other countries, but where the money is loaded on the card previously and then, once you make a purchase, used up, meaning you do not have to take up a loan or build up any debt.