What is a Credit Card
A credit card is a thin piece of plastic or metal issued by banks or finance companies that allows cardholders to borrow funds to pay for goods and services offered by businesses. Credit cards force cardholders to pay back the borrowed funds along with any interest that has accrued by a certain billing date. Credit cards offer consumers convenience and other benefits such as reward points, discounts, or cash back offers.
How Credit Cards Work
Credit cards usually charge a higher annual percentage rate compared to other forms of consumer loans. Any interest charges on the card are usually charged one month after a purchase is made unless previous unpaid interest carries over from the previous month. The time during which a credit card issuer does not charge interest on purchases is called a “grace period” and most issuers offer these grace periods. By law, credit card companies must assure that bills are mailed or delivered to you at least 21 days before the payment is due. With credit cards, grace periods typically apply only to purchase transactions.
A credit card is a thin piece of plastic or metal issued by banks or finance companies that allows cardholders to borrow funds to pay for goods and services offered by businesses. Credit cards force cardholders to pay back the borrowed funds along with any interest that has accrued by a certain billing date. Credit cards offer consumers convenience and other benefits such as reward points, discounts, or cash back offers.
How Credit Cards Work
Credit cards usually charge a higher annual percentage rate compared to other forms of consumer loans. Any interest charges on the card are usually charged one month after a purchase is made unless previous unpaid interest carries over from the previous month. The time during which a credit card issuer does not charge interest on purchases is called a “grace period” and most issuers offer these grace periods. By law, credit card companies must assure that bills are mailed or delivered to you at least 21 days before the payment is due. With credit cards, grace periods typically apply only to purchase transactions.
Credit Limit
A credit limit is the maximum amount of money a lender will allow you to spend on a credit card and one way to determine your limit is by factoring in your credit score, credit history, income, and the limits on your other credit cards. Other ways banks and card companies determine your credit limit is by offering you a predetermined limit or by looking at your credit score, payment history, credit utilization, length of credit history, and credit mix. Credit scores are also used to help determine the interest rate on your credit card. Increasing your credit limit is also beneficial to consumers because it allows for more purchasing power and gives you an opportunity to increase your credit score. Your credit score increases because your credit utilization ratio decreases and the amount of available credit you have increases. After you have had the card for some time, credit card issuers will adjust your credit limit depending on your usage patterns which can cause your credit limit to go up or down. Instead of waiting for your card issuer to change your card limit you can also request for a higher limit. To request a higher card limit consumers can either call their issuers themselves or request for a higher limit through an online account or app. When requesting for a higher card limit, make sure your credit card issuer knows about any recent changes to financial situation that might affect their decision such as an increase of income.
A credit limit is the maximum amount of money a lender will allow you to spend on a credit card and one way to determine your limit is by factoring in your credit score, credit history, income, and the limits on your other credit cards. Other ways banks and card companies determine your credit limit is by offering you a predetermined limit or by looking at your credit score, payment history, credit utilization, length of credit history, and credit mix. Credit scores are also used to help determine the interest rate on your credit card. Increasing your credit limit is also beneficial to consumers because it allows for more purchasing power and gives you an opportunity to increase your credit score. Your credit score increases because your credit utilization ratio decreases and the amount of available credit you have increases. After you have had the card for some time, credit card issuers will adjust your credit limit depending on your usage patterns which can cause your credit limit to go up or down. Instead of waiting for your card issuer to change your card limit you can also request for a higher limit. To request a higher card limit consumers can either call their issuers themselves or request for a higher limit through an online account or app. When requesting for a higher card limit, make sure your credit card issuer knows about any recent changes to financial situation that might affect their decision such as an increase of income.
Types of Credit Cards
The following section discusses the types of credit cards used by the three main groups of consumers. The card types mentioned are the same as far as overall appearance and functionality are concerned, yet they have a few key differences when it comes to product terms, approval criteria, and consumer protections. Each of these card types is uniquely positioned to meet the needs of their respective target audiences.
General Consumer Credit Cards
General consumer credit cards are what average consumers use with a large percentage of the market compromising of general consumer credit cards. Their overall value of these cards varies widely being dependent on the issuer, card network, credit standing requirements, and a variety of other factors. The CARD Act of 2009 also applies to all general consumer credit cards which helps protect consumers from deceptive and abusive practices by credit card issuers
Student Credit Cards
Credit card companies consider students to be a unique group because they consider their income to be limited in the short term, yet their advanced level of education gives them a greater earning potential. Students also are normally younger in age which gives credit card companies an opportunity to develop long term reliable customers who will need help meeting their financial needs in the future. In exchange for the large amounts of revenue which students bring in, credit card companies will offer students more attractive card offers than merited. All student credit card holders are protected by the CARD Act of 2009.
Business Credit Cards
Businesses have unique financial needs which causes them to have a unique type of credit card. Business credit cards tend to offer high credit lines than their general- consumer and student counterparts. They also give special expense tracking features, the ability to customize spending limits for authorized users, and rewards targeted to common company expenses such as office supplies and telecommunication services. To receive a business credit card, you must be the owner of a business and be able to provide a Tax ID Number (TIN), Employer ID Number (EIN), or your Social Security Number (SSN). This information is used to hold you personally liable for any credit card debt accumulated by the business. Unlike the two credit card groups mentioned above, business credit cards are not covered by the CARD Act, which means users are not eligible for number of important consumer protections. However, certain issuers have voluntarily extended key parts of the CARD Act to their small business customers.
The following section discusses the types of credit cards used by the three main groups of consumers. The card types mentioned are the same as far as overall appearance and functionality are concerned, yet they have a few key differences when it comes to product terms, approval criteria, and consumer protections. Each of these card types is uniquely positioned to meet the needs of their respective target audiences.
General Consumer Credit Cards
General consumer credit cards are what average consumers use with a large percentage of the market compromising of general consumer credit cards. Their overall value of these cards varies widely being dependent on the issuer, card network, credit standing requirements, and a variety of other factors. The CARD Act of 2009 also applies to all general consumer credit cards which helps protect consumers from deceptive and abusive practices by credit card issuers
Student Credit Cards
Credit card companies consider students to be a unique group because they consider their income to be limited in the short term, yet their advanced level of education gives them a greater earning potential. Students also are normally younger in age which gives credit card companies an opportunity to develop long term reliable customers who will need help meeting their financial needs in the future. In exchange for the large amounts of revenue which students bring in, credit card companies will offer students more attractive card offers than merited. All student credit card holders are protected by the CARD Act of 2009.
Business Credit Cards
Businesses have unique financial needs which causes them to have a unique type of credit card. Business credit cards tend to offer high credit lines than their general- consumer and student counterparts. They also give special expense tracking features, the ability to customize spending limits for authorized users, and rewards targeted to common company expenses such as office supplies and telecommunication services. To receive a business credit card, you must be the owner of a business and be able to provide a Tax ID Number (TIN), Employer ID Number (EIN), or your Social Security Number (SSN). This information is used to hold you personally liable for any credit card debt accumulated by the business. Unlike the two credit card groups mentioned above, business credit cards are not covered by the CARD Act, which means users are not eligible for number of important consumer protections. However, certain issuers have voluntarily extended key parts of the CARD Act to their small business customers.
Credit Card Features
Credit Card Number: Your credit card number is a 15 - 16 digit number that is usually printed on the front of your credit card toward the bottom, though it is becoming increasingly more common for issuers to print the number of the back of the card. Cardholder Name: The cardholder's name is also printed on the credit card and the name should match any government issued IDs. Usually, an individual's full name is used, but it may appear as the first initial and the last name. Expiration Date: The expiration date is generally found on the front of the card between the card number and cardholder name. Expiration dates display the month and year the credit card expires, but the actual expiration date is usually the first day of the month listed. CVW/Security Code: This is the three-digit number located on the back of your credit card (near the signature box) under the magnetic strip. |