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Credit Card Companies: Good or Evil?
Credit card companies and their products
are like a double-edge sword -- it can be good or evil. The companies can provide various
services, such as convenience, emergency protection, security, and
expenses management, which make your life easier.
But they can also
lead you into deep, unmanageable debts.
For that reason, as a consumer debtor it is important that you understand how the credit card companies and
credit cards work. By learning the characteristics of a good credit
card firm you will be able to choose the right company and enjoy the benefits of their
products and services.
How Credit Card Companies Work
Credit card services are unsecured
lenders. When the firms approve
you to utilize their loan facility it means they lend
you money and expect you to pay them over a certain time period,
usually on a monthly basis. Any credit card transaction that you make is
a loan that you must repay under the specific terms of the agreement
with the issuer.
The company charges interest on the amount you borrow if you choose to
carry part of the balance from one month to another. Let's say you
purchase a washing machine with your card. You'll be charged interest on the value of
the transaction until you repay the loan. The company will not
charge any interest though, if you pay your balance in full in the first billing
cycle.
A credit card business determines the
interest rates charged to you by
your credit history -- your ability to repay a loan. If you make regular
payments without defaulting on loans they will charge you less than
others who have defaulted on their loan obligations.
Signs of a Good Credit Card Company
Credit card services make money from merchant commissions, annual
fees and interest fees. The companies consist of individual retail
stores, banks, or other businesses. Among the hundreds of credit card
institutions, only
about 10 to 20 are really good. Here are some of the characteristics of
good credit card issuers.
- Low Annual Percentage Rates (APRs). Good credit card
organizations offer
low
annual percentage rates. Firms that offer low or even
zero APR credit cards hints of larger
consumer bases that make such offers possible. But if you plan to pay
your balance on credit cards in full, the APR may not be much of a
factor.
- Extended Interest Days. The reputable credit card firms
offer a longer grace period -- the number of days that you have to pay
your bill without incurring an interest charge. If a card issuer offer
25 days grace period it means that your loan is interest free for 25
days.
- No Annual Fee. Some credit
card companies are confident enough not to collect annual fees. When
you apply for a credit card, make sure you consider those that offer
credit cards with no annual fees first. If the card you
are looking at has annual fees, steer clear of them unless they offer
some fantastic feature that you just can't miss.
- Lower, and Lower Number of, Fixed Fees. In addition to
annual fees card issuers also charge various fixed fees, which include,
but not limited to, cash advance fees,
late-payment fees, balance
transfer fees and over-credit-limit fees. The best credit card
issuers are those with the lowest, and lowest number of, fixed fees.
So credit card companies can be good or evil to you. It depends on how
you use their services. You will be able to enjoy the benefits of their cards or
fall into uncontrollable credit card debt instead.
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