A credit card is a great financial tool. It can be more
convenient to use and carry than cash and it offers you valuable consumer
protections under federal law. However, it is also a big responsibility.
If not used carefully, you may end up owing more than you
can repay, damaging your credit rating and creating credit problems for
yourself that can be difficult to fix.
The competition among credit card issuing companies is
getting stiffer and stiffer by the minute. Each company offers the consumer a
choice of several different kinds of credit cards - all of which, they claim,
have been "tailor-fit" for their individual lifestyles.
In addition to these
cards, they entice customers to sign up by providing lower interest fees for
balance transfers, and no interest payments for installment purchases.
Types of Credit Cards
- Standard
Credit Cards - Standard credit cards work as you might expect - with the
cardholder using the card in order to pay for goods and services up to
their agreed credit limit.
- Charge
Cards - Charge cards work in the same way as normal credit cards with one
difference, the balance of the charge card must be paid off in full every
month.
- Platinum
and Gold Credit Cards - Platinum and Gold credit cards are only available
to applicants who earn a certain level of annual income and, accordingly,
offer a number of benefits to the cardholder which will vary from provider
to provider.
- Store
Card - A variation on the credit card, a store card will allow the
cardholder to make purchases with a particular retailer on a credit
account.
- Reward
Credit Cards - Reward credit cards, or loyalty cards, operate in a similar
way to charity cards except that the main recipient of any benefits is the
credit cardholder.
- Charity
Credit Cards - Charity credit cards offer all the usual benefits of a
regular credit card but also donates a particular percentage of what you
spend to the charity to which it is affiliated.
- Business
Credit Cards - Usually issued to corporate executives or business owners
in order to more easily keep business expenses separate from personal
charges.
In addition to these credit cards, there are also Low APR credit cards, which are the most credit cards now a days
The benefits of credit cards
Credit cards do also have benefits which should not be
discounted. The major benefit of credit cards is that they allow people to make
large purchases, such as those for cars or expensive semester textbooks, even
without the upfront cash to do so.
Responsible repayment of credit cards allows card holders to
develop quality spending habits and fit into middle class American life. Credit
cards help for emergencies.
Additionally, negotiating the mixed messages between credit
cards and societal rules for delayed gratification can help adolescents develop
stronger ethics and a basic moral code for living.
Drawbacks of credit cards
By offering credit cards to children who have not fully
learned how to delay gratification, American society creates a consumer subset
who tend to buy impulsively with little attention to whether or not they will
be able to repay the debt accrued by purchases made on credit cards.
This, in turn, creates a subset of Americans who are
increasingly in debt and unable to make repayments, resulting in problems with
personal credit and economic balance.
The reality of credit cards is that you do eventually have
to pay back what you owe and at much greater cost than that of the initial
purchase as a result of the high interest rates of most credit cards.
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