Debts and Credit Cards Review - Credit & Loan Options Debts and Credit Cards Review - Credit & Loan Options

Debts and Credit Cards Review

Credit Cards:– If credit card is not used responsibly it can result to a serious financial problem which can easily lead you into a chain of unpaid bills that chokes your financial future. You should realize that credit card ownership is like a limited personal loan offered to you by credit card company, whenever you need it.

Keep a credit card in your pocket and you have the ability to make purchases anytime, anywhere, without necessarily having the cash needed to pay for it. The bill will come due in 30–45 days — sometimes even less. When you receive a bill, the card company wants back the money it “loaned” you.

If you pay it off in full, there’s no problem. If you leave any of the balance unpaid, the card company slaps you with a pre-determined interest rate – usually somewhere between 12 and 29%, depending on your credit score.

Different Types of Credit Cards
There are several types of credit cards. Although they can be used in different ways, they have one thing in common: they are all considered revolving debts. This means that they allow consumers to carry balances from month-to-month and repay loans over time.

Some common types of credit cards are:
Traditional Cards – These are standard credit cards that are used to charge purchases – Visa, MasterCard, American Express and Discover — are accepted nearly everywhere.
Rewards Cards –These are also called loyalty cards. Most of the store ins SA have loyalty programmes where the issue reward cards to their consumers, banks also have these kind of cards,Here are just a few reward cards titles: Pick n Pay Smart Shopper, Clicks Clubcard., Vodacom Rewards.Woolworths WRewards.FNB EbucksNedbank Greenbacks.Standard Bank Ucount.Jet Thank U.

Premium Rewards Cards –These are cards for heavy spenders and people who travels a lot, with premium cards, you can shop and pay your bills anywhere, in a foreign country, they are also used to pay for airline tickets, concierge services, priority baggage handling, travel insurance, cash back and no foreign transaction fees. They even offer unlimited visits to VIP airport lounges. However, it comes with a cost. The annual fees can be very high.
Balance Transfer Cards – If you are looking to consolidate credit card debt, this is a popular option. Here you can transfer high-interest debt from one or more credit cards to another card with a lower interest rate Some even offer premium rewards like double the cash back. It may be necessary to have a good-to-excellent credit rating to be approved for credit card refinancing. Beware of transfer or annual fees.

Retail cards:These includes cards from retail outlets such as departmental store, gas retailer, clothing stores – these retailers have partnered with bank or card network such as Visa, MasterCard, Discover or American Express. Cardholders may get merchandise discounts or rewards points when they buy from the sponsoring merchant.

Why a Student Should Have a Credit Card
Students may need credit card for the following reasons:- if a student is issued with a credit card and use if responsibly, this then becomes one way of building a solid credit record with the opportunity to take out loans, rent an apartment and much more. Credit cards can help students learn to become more fiscally responsible and manage their money better, You must be 18 years and older to qualify for the card.

Other benefits for students to own a credit card, may be tied to the urge to track spending, not having to carry cash, learning financial responsibility, qualifying for rewards programs and, perhaps most important, having a payment method available for use in case of emergency.
One major negative impact on student having the card is eleviating the level of temptations to spend wildly and this can therefore result into severe credit record damage as well as for the parent or guardian who signed or introduced the student to apply.

Different between credit card and debit card is :-
Credit cards is indirect loan given to you to make purchases while debit card represents your own money – with debit card you don’t owe any one.  Credit card companies lend you money with the anticipation you will repay it at the end of the next billing cycle. If you don’t, they will charge interest on the balance. They also will charge the store where you made the purchase a transaction fee between 1–2%. This is how they make money.

With debit cards, you are spending money that is already in your bank account. The amount spent will be deducted from your account until the account reaches zero or you put more money into it. The bank that issued the debit cards also charges a transaction fee every time you swipe your card. The debit card’s advantage is a budget matter. The amount of available funds drops as you spend.    When it reaches zero, the card will be declined, in which case you won’t owe anyone anything.

Credit cards, on the other hand, compile your purchases and ask you to pay for them all at the end of the month.
If you max out your card, it will be declined, but you still owe whatever charges you made with them.
The advantage credit cards have is they are more secure and have better rewards programs.

If your credit card is stolen or compromised by identity theft, you are not responsible for charges as long as you report it. Also, some of the rewards programs (e.g. cash back, mileage for airline tickets, hotel stays, etc.) can be significant if you use the card often.

With debit cards, rewards programs are minimal and security is a big issue. The thief can spend however much is available in your bank account. You will have to dispute it and will lose access to that money for however long it takes to settle the dispute.

How Credit Cards Work
There are so many credit cards with so many various features and rewards that the first thing to do is research them all and find a card that suits your needs. You can consider offers you receive in the mail, but the best research is available online. When shopping for cards, think about how often you plan to use the card, whether you plan to carry a balance each month, and what rewards you’d like to earn. Read the fine print before applying, particularly as it applies to interest rate charges when you carry balances over from month-to-month. Pay close attention to all fees associated with the card.

Regardless of what type of credit card interests you, the card works in the same basic way. If you’re approved for a new line of credit, the card company will issue a card along with information about interest rates, spending limits and payment deadlines. Issuers determine your rates and fees largely based on your credit score and history. Although interest rates are capped by law, they can be very high and cost you thousands of dollars over time.

If you are approved for a card, you will receive it in the mail. You will then have to activate it — usually by phone. After that, you’re ready to spend. Depending on the type of card you have, you should be able to charge purchases at most of the stores you visit. Make sure you don’t go over your credit limit, as this could cause you to incur overage charges. At the end of each month, you receive a bill and statement. Review it carefully to ensure that you made each purchase listed. If there’s something you don’t recognize, you may be a victim of identity theft.

If you have no questions or concerns about the statement, pay the bill. It’s important to pay it on time every month. A late or missed credit card payment could harm your credit score. Also be aware of your total balance, rather than just paying attention to the minimum payment.
The best practice is to pay off your balance in full each month so as not to accrue interest charges and credit card debt. Paying only the minimum amount could keep you in debt for years longer and will end up costing you more in interest.

Common credit card habits with serious negative repercussions include:
• Carrying over a balance from month-to-month
• Paying only the minimum balance
• No budget to track spending
• Using too many credit cards
• Taking cash advances
• Missing payments and incurring late fees
• Impulse buying
• Exceeding credit line
While all the reasons listed above can ruin your credit, the most maddening one is making only the minimum payment each month. That practice turns a financial limp into a disastrous pratfall that will cost you thousands of dollars in unnecessary interest payment.

There are some emergencies that trap people with debt — especially from outstanding medical bills. Sudden expenses come up and credit cards seem to be the solution. Unfortunately, using credit cards is only a temporary solution. Using a credit card to cover one emergency or pay one extra bill still leaves a hefty debt that is not easy to erase. Interest charges build on the owed balance and getting back in control can seem impossible.

How Credit Card Companies Make Money
Credit card companies make billions of dollars each year off consumers and consumer transactions. While it’s a common belief that most of the industry’s money comes from interest charges, that’s only part of the story.

Here are the main ways in which credit card issuers make money:
Card companies make a large portion of their profits from actual purchases and credit transactions. Most card issuers keep about 2% of the money from every transaction. That means that if you buy R100 worth of groceries with a credit card, the grocery store only receives R98 and the card issuer receives the other R2.

The rest of the money comes from you, the consumer. Credit card issuers make money not only from your interest payments but also from any fees such as late fees, overage charges, cash advances and annual membership dues.
Credit cards can be a useful tool, but only when they are used properly. When you open a new credit card account, be sure you know exactly what you’re agreeing to. Familiarize yourself with all of the fine print, don’t buy what you can’t afford, and pay your bills responsibly.