Credit Cards 101: The Issuer and the Cardholder
A credit card is an agreement between the issuer (a financial organization or a bank) and the cardholder (you). The agreement becomes a binding contract when you sign it, indicating to the credit company or the issuer that you will pay them in future for the credit lent to you. The issuer or the bank lends you the money that you need and it expects you, the cardholder, to pay back the money within a stipulated period of time.
Credit cards are being widely used in the US and across the world as a convenient financial mode to make purchases and payments. It is quite comfortable to carry a credit card rather than carry wads of cash. It is easy for people to manage their expenses with a credit card. Suppose you need to book a flight ticket urgently, you can book it with a credit card. You can use the cash that you have presently to take care of expenses you need when you reach the destination. You can always pay the credit company later. As a card holder, you can get the right to avail of consumer protection under federal law. You can return an item that is not upto the satisfactory standards, damaged or delivered late. Your credit company comes to your rescue and sets up a dispute with the trader or merchant and gives you credit till the case is pending. If you lose the dispute, the credit applied to your account can be reversed too.
You have to be atleast 18 years of age to apply for a credit card and also have a regular source of income. The credit bureau runs a check through your credit profile to ascertain if you have any outstanding loans or bills on your account. If you already have a credit card to your name or are applying for a fresh one, your credit history makes the credit card issuer as to know how much credit can be lent to you. If your credit history is not good, then you may get a credit card with a high interest rate. Lenders however, perceive you to be a low credit risk if you live in a particular residence or are in one profession for atleast two years.
The prospective cardholder should look for low interest rates on the credit card. When shopping for the credit card, he should also look for annual fees. There are some issuers who charge annual fees, while there are others that do not. Many credit card issues aspire to offer the credit card with a zero or a lesser promotional rate of interest. Till the promotional period lasts, the credit card holder does not have to pay anything as interest or pay negligible rate of interest on the outstanding balances.
If you are prompt on your payments and do not go over the limit, you can even call the credit card company and bargain for a lesser interest rate. Most credit card issuers oblige because they want to retain you as their valued customer. You can even have a late fee waived or credit given to you as a good will gesture if you have been incorrectly charged. Use your credit card judiciously. Experts say that your credit card payments should not exceed 15 percent of your takeaway home salary package. Also discard the cards that you do not use. It is not good to have too many unused credit cards because it can affect your credit rating. The cardholder has to contact the credit-reporting bureau and ask it to remove the discarded cards from your report. It should be mentioned in your credit file that the cancellation and closure of the card was initiated by you and not by the issuer or the credit card company.
Daniel Cohen recommends Find Credit Cards for comparing different Advanta business credit cards.
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