Credit card companies and their products are like a double-edge sword — it can be good or evil. It depends on how you use their services. The companies can offer 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 you should understand how 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 creditors approve you to use their loan facility it means they lend you money and expect you to pay them over a certain time period, usually monthly. Any credit card transaction that you make is a loan that you must repay under the specific agreement terms of 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 firm determines the interest rates charged to you by your credit history — your ability to repay a loan. If you make regular payments with no default they will charge you less than others who have defaulted on their loan obligations.
Signs Of Good Credit Card Providers
Credit card issuers make money from merchant commissions, annual fees and interest charges. 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 issuers offer low annual percentage rates — or even 0% interest credit cards for balance transfer. Firms that give low APRs hints of larger consumer bases that make such offers possible. But if you plan to pay the balance on your 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 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 don’t accept any credit card offers without understanding how you will use them. However, use the above points for evaluating many credit card companies and then choosing one credit card or two that best suits your needs.
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