Credit Cards
Finding the Right Card for You
Ever since Ralph Schneider’s innovative development of a multi vender charge card in 1950, the American consumer has become more and more reliant on the vast array of credit cards in our increasingly cash-free economy.
Today the average American has four credit cards to their name and a combined national balance of some $800 billion. While this line of credit has financed the needs and dreams of the modern consumer it has, as of 2004, earned credit card lenders $43 billion in late payments, balance transfer, and over-limit fees. With these figures it is more important than ever to understand what kinds of cards are available and which best fit the consumer’s needs in an economy increasingly dependent on cold, hard plastic. Let’s examine the various kinds you might find:
The standard credit card allows the user a revolving balance and a credit limit. Credit is used when purchases are made and credit restored when a payment is made. Finance charges on outstanding balances are applied to the consumer at the end of each month and a minimum payment must be paid to avoid late-payment fees.
Premium credit cards are similar to the standard card but differ in that they offer benefits and incentives such as cash back, travel upgrades, reward points, and other incentives to cardholders. These cards can have higher fees and usually require the cardholder to meet certain credit scores and income requirements.
Secured credit cards are a common option for borrowers without a solid credit history or with less than spotless credit. The cardholder must put down a security deposit on the card and the credit limit is typically equal to the amount of the deposit. Like standard and premium cards, secured cards have revolving balances depending on purchases and payments made.
Prepaid cards are similar to secured credit cars, but instead of a deposit that limits the cardholder’s withdrawals a prepaid card cardholder must load money onto the card before it can be used. Credit is dependent on how much money has been loaded onto the card and credit is not renewed until more money has been placed in the card account. In this way prepaid cards work very much like debit cards, but do not require a checking account.
Charge cards are another option for consumers and do not have a credit limit, but the balance placed on the card must be fully paid by the end of each month. This kind of card usually doesn’t levy a minimum payment or finance charge as the balance is paid off in full, however, late payments are subject to charge restrictions, card cancellations, and fees depending on the card agreement. <
Business credit cards are suited specifically for a business employee or owner and give them an easy way to separate business and personal charges. Standard business credit cards and charge cards are two popular options available to the modern professional.
These are an example of the most common credit cards available to the average consumer and, when considering opening a line of credit, it is important to evaluate the different lending options and choose the one that best fits your needs, buying practices, and economic situation. While credit cards have been an invaluable addition to the world economy over the last fifty-eight years and easy, available credit has opened many doors to the modern cardholder, it is also true that 8.3% of American households owed $9000 or more in credit card debt, showing how important it is to match the card to the consumers needs and financial abilities.
