A credit card is a payment card that someone is approved for that allows them to have a line of credit that they can use to make purchases at all kinds of places. These are essentially loans that the credit card company gives a cardholder and allows them to make the purchase and pay the money back in small installments, plus added interest fees. Credit card companies can also charge fees for other services that they offer their cardholders.
Why Should Someone Have A Credit Card?
Credit cards can be tempting, but they can also be very necessary. One of the advantages to most credit cards is that you don't have to use them unless you want to. They can be, in a manner of speaking, a safety net for emergencies. There are lots of things that can happen in life that you may not be prepared for, a credit card in your pocket makes sure that you are prepared when something unexpected strikes.
Credit cards are also good for building credit. It is almost impossible to make any major purchase without some credit. Houses, cars, and other major purchases are a dream to someone who hasn't built up their credit score. One or two small credit cards can make all the difference. A couple small purchases per month and then paying your balance off can help you build good credit for when you are ready to loans for a house or something else big in your life.
Types of Credit Cards
There are a few different types of credit cards that someone can have. The most popular is an unsecured credit card. This means that the company has issued you a line of credit without you having to put up any collateral for this loan. Essentially, they are trusting you with a certain amount of money and letting you make payments on whatever percentage of that money you spend. There are also secured or "prepaid" credit cards. With these you have to put up some form of collateral, usually money, and they issue you the card. These types of cards allow you to build credit without a lot of risk. Then, there are store specific credit cards. These cards can only be used at the store that issues them. These cards are easier for someone to get than traditional unsecured cards because they can only be used in one place, eliminating a lot of temptation.
How Do Credit Cards Work?
Credit cards work in a very easy way. You use the card to make a purchase at a store, restaurant, or wherever else you shop. The card company gives the money to the place you made the purchase. Then you make payments to the credit card company until the balance is paid off plus interest that is charged for the use of the card. Most credit card companies don't charge interest if you pay off the card each time you get your bill. However, if you go past this time to pay it off they will charge you interest. This interest is depending on your credit, the card company, and how long you take to pay off the purchase. The faster you pay off your credit card debt, the better your credit will be. Also, the more you pay your card off in time, the more credit the credit card company will allow you. This will allow you to make larger purchases as you build credit with them.
Credit Cards offer Security
While the idea of having a credit card can be a little scary with the amount of debt that you could build up, there is also a sense of security that can't be denied. If you are someone who carries cash around, you understand the risk of what happens if you loose your wallet. The chances that you will just have lost that money and never see it again are pretty good. With credit cards, a simple call to the company can shut the card down, and whoever finds your card won't be able to use it. The company can then issue you a new card and your money is secure. They also give you a sense of security in emergency situations. There is nothing worse that being caught on the side of the road and have no money to take care of the car problem. Medical emergencies that you aren't prepared for can be a nightmare, but if you have built up credit with a good company, it can take some of the edge off.
In conclusion, while having a credit card can seem scary, there are a lot of benefits to having one as well. If you can be responsible with your money and make sure that you use it when you need to rather than making frivolous purchases all the time, a credit card can be a very handy tool in your pocket for many reasons. It can be the start to a great future and the security for an easier future if you use it responsibly.