 |
| |
|
|
|
|
Making Sense of Credit Card Solicitations
The MMI Online Articles are designed to inform, assist, educate and alert consumers.
| |
|
|
| |
| |
If you are creditworthy, the competition for your interest rate dollars is fierce. In 2002, an estimated 4.89 billion credit card solicitations were mailed in the U.S. – approximately 17 for every resident – advertising low introductory rates and bonuses for making purchases. In fact, credit is so readily available that it is often taken for granted. However, it is important to realize that not all “credit cards” are created equal. There are thousands of credit card issuers and several different types including bank cards, retail cards, charge cards and secured cards. Savvy consumers shop for credit the same way they shop for a major purchase.
Following are descriptions of the major types of cards used today:
Debit card - Debit cards are not actually credit cards. Debit cards are offered by financial institutions to making banking simpler. When you use a debit card, the money is automatically deducted from your bank account. Debit cards often look like credit cards and can be used in places where credit cards are accepted; the difference is that you don’t borrow money for the purchase. Instead, the money comes out of your checking account immediately.
Charge cards - Charge cards are also known as travel or entertainment cards. Diner’s Club and American Express are examples of charge card issuers. Charge cards do not have limits, but do often carry hefty annual fees. Unlike a bank credit card, purchases made on a charge card must be paid in full at the end of each billing cycle.
Secured credit card - As collateral, secured credit card issuers require you to make a deposit with their institution in an amount equal to your line of credit. At first glance, this seems counter-productive, but if you are recovering from a financial set-back, a secured credit card is a great way to rebuild your credit history.
Retail card - Some merchants issue their own lines of credit that can be used only at their stores. Retail cards can be easier to obtain than a traditional bank credit card, so when used properly, they can be a good way to establish a positive credit history. Just be aware that many retail cards can be expensive, carrying high interest rates and hefty penalties for nonpayment.
Bank card - For a price, credit card issuers allow consumers to borrow money and, if they choose, repay over time. Unlike retail cards, you can use a credit card at many different locations (about four million retailers accept credit cards in the United States). Because there are so many issuers of bank cards, credit card terms can vary quite a bit. When choosing a bank card, consumers should compare interest rates, fee structures, and grace periods.
Certainly everyone’s financial life would be easier if they knew exactly which credit card to choose. However, because everyone’s needs are different, there is no one best credit card.
|
|
Feedback Forum
Share your comments with us about this information.
Click Here To Use Our Budgeting Calculators
|
|
|
|
