Your Credit or Debit Card A Nightmare or What?
The time to understand how to effectively overcome the challenges associated with carrying a credit card is now because using cash to pay for personal or family expenses is generally discouraged for many reasons, for security, for accountability and best of all it could enables you to monitor and manage your expenses quiet well. The way we buy and sell is gradually becoming much more cashless, Cashless transaction means a system where people are expected to carry a plastic card that gives the holder right to spend cash equivalent without carrying and spending physical cash.
There are no credit checks required and you can never go overdrawn or spend more than you've loaded on to your card. If you don't have a traditional credit card, either by choice or because of past credit issues, a prepaid credit card is a great alternative with zero risk to your credit file.
The time to understand how to effectively overcome the challenges associated with carrying a credit card is now because using cash to pay for personal or family expenses is generally discouraged for many reasons, for security, for accountability and best of all it could enables you to monitor and manage your expenses quiet well. The way we buy and sell is gradually becoming much more cashless, Cashless transaction means a system where people are expected to carry a plastic card that gives the holder right to spend cash equivalent without carrying and spending physical cash.
What is a credit card?
A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.
A credit card is different from a charge card: a charge card requires the balance to be paid in full each month. In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest being charged.
A credit card also differs from a cash card, which can be used like currency by the owner of the card. Most credit cards are issued by banks or credit unions, and are the shape and size specified by the ISO/IEC 7810 standard as ID-1. This is defined as 85.60 × 53.98 mm (3.370 × 2.125 in) (33/8 × 21/8 in) in size.
(By wiki)
It is not a surprise to find surfers paying with a credit card or debit card for goods and services online. Paying for goods and services online is easy as…, h-o-w?
- Find the product you need online
- Click on it, and you are taking to a secured page to fill your credit details to make payment
- After payment with your credit card, you will receive a confirmation that details the transaction-the amount deducted and what you purchased
- You are also given notification on money back guarantee if you don’t like what you paid for
- The product is delivered to you, depending on the nature of the product. For software or digital materials you can download it, but for physical products you may have to allow for a period of time for delivery.
So sweet, don’t you think so?
I love a virtual store, yes. The credit or debit cards you are holding, is it a blessing to you or a
curse? The answer lies on how you handle them.
It may interest you to know that most people who carry credit cards use them wrongly and as a result have been put under credit control, and being under credit control means you are not allowed more credit until you are able to pay off your entire credit card balance for that month in order to resume full usage of your credit card after sometime.
Looking at your monthly credit balance, do you really think it’s a smart financial decision to make small regular payment as opposed to making an outright pay off of your credit balance per month. Making small regular premium-like payment attracts interests for each unpaid balance per month and it is carried over to the next month to add to what you need to pay for that month, though it may seem convenient at first, you must realize that using a credit card without total pay off of monthly credit balance means you are in dept.
The interest accumulates over time until it become almost impossible for you to pay it off; you end up placed under credit control; so, my advice is this, outright pay off of all accrued credit card interest plus balance is a smart financial move.
How do you obtain a credit card or a debit card?
To obtain a credit or debit card, you could approach any bank or better still speak with your account manager about this. Each bank have its procedure for obtaining a credit or debit card, however the following should guild you on what type of credit or debit card you want to obtain and from which bank.
The types of credit cards or debit cards that banks offer may include the following:
1.
Cash Back Credit Cards
Cash back credit cards are simple. Your issuer will award you a small percentage of your spending back in cash! So the more you spend, the more you'll earn back. This is great for those who presently have a regular spending pattern or make expensive purchases.Credit Cards with Rewards
Do you pay your balance in full each month or make large purchases on credit? If so, rewards credit cards are a great choice. They're similar to a cash back credit card, but you collect points for each purchase you make. Instead of cash, these points can be redeemed for free flights, car rentals, hotel stays, gasoline, gift cards, statement credits and more depending on which type of rewards card you choose.Balance Transfer Credit Cards
Credit card issuers aren't just trying to get first time card holders. They are also looking to lure customers from other card providers. One of the most effective ways of doing this is to offerbalance transfer credit cards, where customers can benefit from an introductory offer of zero interest on their transfered balance for a set period of time, normally between one year and 18 months, saving you a huge pile of cash!Charity Credit Cards
Most of us would like to give to charity when we can afford to, so charity credit cards are a good way for us to do that. It's a very simple system - when you make a purchase with the charity card, the provider will automatically donate a small percentage of the total to a charity of your choice.Student Credit Cards
Student credit cards are specifically designed to meet the needs of college and university students. They often come with extras that are tailored to help students through their studies, such as discounts for music and clothing stores. If you're a responsible student, this type of credit card could benefit you.Credit Cards for Poor or Bad Credit
For the millions of people with poor or bad credit histories, there are specific cards available to help you rebuild your credit rating. Credit cards for poor credit or bad credit are a good way to do that. Initially, you will be granted a small line of credit, but your limit will increase as you use your card responsibly and make timely payments.Prepaid Credit Cards
Another type of credit card is the prepaid credit card. These cards work much like a debit card. You simply pre-load the card with your own money so you'll always know how much you have available to spend.There are no credit checks required and you can never go overdrawn or spend more than you've loaded on to your card. If you don't have a traditional credit card, either by choice or because of past credit issues, a prepaid credit card is a great alternative with zero risk to your credit file.
By Issuer
- American Express
- Bank of America
- Capital One
- Chase Card
- Citi Card
- Discover
- First Premier
- HSBC
- MasterCard
- Sears
* Picking the right card
And before you decide for any type of credit card, you could begin by considering the following fees that goes into obtaining it:
Calculating yearly credit balance:
Monthly balance X Interest rate = Monthly interest
Once you obtain the card don’t think that is all you have to do, it is your responsibility to monitor your credit and keep the card safe.
And before you decide for any type of credit card, you could begin by considering the following fees that goes into obtaining it:
· Monthly interest rate
· One time yearly fee
· Insurance cost included
· Cost of late charges
· The over the limit charges
· Returned check fees
· Cash advance fees
· Etc
Using a credit a or debit card means you have to pay some charges or fees which could accumulate if not checked over time, the terms of use of this facility could become overwhelming if you don’t take the right type of credit card and from the right bank.
The cost implication of carrying a credit or debit card is enormous; interest rate, yearly rentals, late charges, return check fees, cash advance fees, etc. By choosing the right credit or debit card which could be a low interest credit/debit card or no fee credit/debit card depends on your spending behavior. The right credit or debit card for you means you are able to cut or eliminated entirely the charges associated with your card.
In order to shop online you requires a credit or debit card, and if you’re able to understand the dynamics of using a credit or debit card well before getting one or before you start clicking on shopping cart online would help you save much of your money.
One credit or debit card fee I honestly believe you can easily eliminate is the over the limit fee for returned checks by getting organized and being in complete command of your credit account. What about late charges fees, insurance fees which is absolutely not necessary, etc.
Choose the right credit card from the right company:
There are different types of credit card and credit card issuing organizations and some of them include Visa cards, Master cards, American express, etc. First you must decide whether you want low interest credit card/high fee charges or a high interest credit card/low fee charge. Before taking this decision, compute the average interest fees you will pay as compared to a low interest fees.
To compute this you multiply the credit balance per month by the interest rate. The results per month are added together for the twelve months that makes up a year. Any month you are able to pay off the credit balance is excluded.
To compute this you multiply the credit balance per month by the interest rate. The results per month are added together for the twelve months that makes up a year. Any month you are able to pay off the credit balance is excluded.
Calculating yearly credit balance:
Monthly balance X Interest rate = Monthly interest
(1st month interest + 1st month balance) + (2nd month interest +2nd month balance) +…….+(12th months interest + 12th months balance) = Yearly interest
Remember though that 2nd months balance = The amount of credit you are able to pay off – (The amount of credit used for the second month + 1st year interest + 1st year balance)
Let’s look at an illustration:
Months | Credit used | Pay off | Credit balance | Interest rate (10%) | Forward |
January | $ 250 | $ 200 | Dept $ 50 | $ 5 | $ 50 + $ 5= $ 55 |
February | $ 300 | $ 315 | $ 55 - $ 15 = $ 40 | $ 4 | $ 4 |
And so on
The present month’s interest and balance is added to the balance of next and this process continues. The question you could ask yourself now is this, will I be saving money by obtaining:
1. Low interest and high fee credit card
2. High interest and low fee/no fee credit card
Looking closely at you financial behavior; are you in able to paying off your monthly credit balance per month if so, you are better of using a Low fees credit card which attracts high interest that you will not even pay since you don’t have any interest to pay, but if you know that you financial behavior does not allow you to pay off your monthly credit fees, then you need to use a card that will attract a high initial fee with low credit interest per month.
Having determined the type of credit card to carry, the next thing to do is to carry out fact finding research to ascertain which credit card issuing bank you will patronize because each bank issuing it have different charge and processing fees.
Once you obtain the card don’t think that is all you have to do, it is your responsibility to monitor your credit and keep the card safe.
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