
credit card is part of life,there are so many different types of credit cards available, Parents can see how their kids are spending the money and hopefully have discussions with them and the way their children need to learn smart ways to manage it A credit card is a form of borrowing provided by a bank or building societ it can be used the following ways: Purchasing items Cash Withdrawals Balance Transfers A credit card can be used to consolidate debt by transferring a balance or balances from another card provider(s). The balance on the credit card could be considered a form of short term loan.
How does a Credit Card work?
In return for the above, a credit card provider will apply interest rate charges against the
amount you spend, transfer or withdraw. Interest is charged on a monthly basis, with the rates being displayed under Typical APR. These strategies will ensure your kids get the right start, and dont wind up with bad habits.
Steps to take:-
Experts say parents should take several gradual financial steps before giving a kid a credit card First, see to it that the child has a checking account. “Children first need to learn the basic skills of writing a check and tracking money,” says Rich. After they have shown they can balance a checkbook, let them use a debit card, which looks and acts like a credit card but is tied to the checking account. When they have mastered those basics, apply for an extra credit card under your own account at a retail store or bank. Tell them how the card works starting with the connection between charging one month and paying the next. Emphasize that it’s not free money unless the balance is paid in full before the grace period expires.
Explain interest and how it compounds if a debt piles up. Look at the fine print and review other key terms such as late fees. Stress the importance of keeping the card safe, and what to do if it’s stolen or lost. Set limits and monitor the child’s usage. “See what happens when you tell them they can spend $100 on a wardrobe,” says Rich. “Build up their level of responsibility.” When you feel they are ready for a card in their name, encourage them to shop around for low rates and fees.
Emphasize the importance of a good credit history and how a bad one can thwart their efforts to buy their first car or apartment. Show them how to get a copy of their credit report.
Give the child responsibility for paying all or part of their balance from an allowance or job. “If the child isn’t earning the money, a lot of the reality is lost,” says consumer advocate Weinberg. “I don’t think most people appreciate the value of money until they are sitting at a desk pulling in a paycheck.”
there are Three types of credit cards exist:-
bank cards (which are general credit cards—MasterCard, VISA, Discover), general credit cards issued by companies (American Express, Carte Blanche, Diners Club) and proprietary cards (used by stores for use only at such stores—Staples, The Limited, or Sears, or gas companies such as Texaco and Exxon).
Two types of bank credit cards exist: -
unsecured and secured:Unsecured cards are issued on the basis of a person’s good credit. Secured cards require the holder to deposit a set amount, such as $300, with the bank issuing the card. The holder then receives a credit line equal to the amount on deposit. Using a secured credit line is costly because the holder may earn little or no interest on the deposit. However, it’s a good way to build up a good credit history.
Once such history is in place, a person can get an unsecured credit card.
The most popular types available are :-
0% Balance Transfer Credit Cards These credit cards are designed for moving outstanding balances from one credit card provider to another – offering a 0% introductory balance transfer rate for a fixed period. Some providers charge a balance transfer handling fee for using this facility, between 2% to 4% of the balance transferred.
The 0% introductory period varies from card to card, but is usually around 12 months. These cards are suitable when your credit card 0% introductory balance transfer period is ending soon or if your card provider is charging you a high interest rate on your current outstanding balance. 0% Purchase Credit Cards These credit cards are designed for spending and offer a 0% introductory purchases rate for a fixed period.
The 0% introductory period varies from card to card, but can ranged from 3 to 13 months. These cards are suitable when your credit card 0% introductory purchases period is ending soon or if your card provider is charging you a high interest rate on your purchases. Your child also can use his credit card to get cash.
He can use the credit card like an ATM (automated teller machine) card and can receive cash if he has arranged with the credit card company to get a PIN (personal identification number) number.
Of course, the amount of cash he can withdraw cannot exceed his credit limit. Often there’s a cost to ATM withdrawals as well: the transaction fee (a percentage of the withdrawal, such as 2 percent or 3 percent), plus interest to repay the withdrawal (and this interest rate may be higher than the usual credit card rate).
Rebate cards are credit cards that entitle the holder to certain paybacks if he spends certain amounts(www.cardlearn.com/rebate.html). For example, Discover card gives a cash rebate of 1 percent of annual purchases. Other cards may give frequent flyer miles, long-distance calling time, or other benefits, although there may be a higher annual fee for these cards A balance transfer is when you move an outstanding balance from one credit card provider to another. This usually incurs a charge called a ‘balance transfer rate’. The provider may also charge interest on the balance transfer, although numerous credit card providers offer 0% interest on introductory balance transfers for a fixed period – usually 12 months.
Cash Back Credit Cards
These credit cards allows cardholders to earn cash back on their purchases. The more the card is used for purchases, the more cash rewards are applied to the card. The cash back rates available are dependent on the issuer of the card – they vary between 1% to 5%.
Repaying Credit Card Borrowing When your child charges a sweater on a credit card, it’s a form of borrowing that must be repaid. Each billing cycle, which is typically every 28 or 30 days, she’ll receive a bill. She should check it carefully against receipts she has saved from her purchases because mistakes can be made—for example, she may be charged for something she didn’t buy.
How much does a Credit Card cost?
All banks and building societies which lend money are required by law to display the cost of borrowing. This appears as ‘APR’, which stands for Annual Percentage Rate and is the interest rate that the credit card provider charges for purchases, balance transfers, cash advances, annual fees and other charges. The lower the APR, the cheaper it is to borrow/spend. Current rates vary from 6.9% Typical APR to 39.9% Typical APR.
CREDIT CARD USE DEBT ADVANTAGE DISADVANTAGE ELIMINATE NOW CONSUMER LOAN SELF HELP BASICS DEBT LEARNING TIPS STRATEGY MANAGEMENT PRACTICAL ADVICE IDEAS EDUCATION FREE ARTICLE ADVICE TIPS EDUCATION ONLINE Using Credit Cards
Credit Cards are a great concept but they end up bringing financial ruin to many people because they do not use them properly. Too many people get a credit card and then find that it is maxed out within twelve months. Then for the rest of its existence they end up paying off interest and barely making a dent in the principal. This is not a good way to manage your money.
Let’s go over some of the benefits credit cards offer before we get into their detriments. A credit card can be a great convenience and provides the safety of not dealing with cash, which is more easily lost. Credit cards are also very useful in the sense that they offer protection under the Consumer Credit Act and you can often get your money back in a fraudulent purchase that you would be unable to do with any other payment method. Credit cards also offer “incentive” benefits such as air miles or credit toward future purchases. Credit cards also give back a percentage of your purchases to approved charities in some cases which is a really nice way to give back at the same time you are spending the money you normally would spend.
Therefore there are most certainly benefits for using a credit card. Given all of the above, credit cards still cause problems for most people more often than they provide benefits. Most of these problems come in the form of excess consumer debt, which arises when one carries a balance on the credit card while paying the absolute minimum each month.
These problems occur when one begins looking at the credit line of your credit card as simply bonus money that you now have to spend. Instead you need to allocate existing funds for every purchase you make on a credit card. This way you know that you will be paying off that principal balance at the first of next month rather than carrying for your foreseeable future. Another problem that happens with credit cards is that people simply get too many of them.
With the credit environment as it is today most people are barraged with new credit card offers practically every day of the week. And some people accept each one of those offers and end up with more credit cards than they know what to do with. With increased numbers comes increased temptation. When you have a multitude of credit cards it becomes much easier to talk yourself into carrying a balance on one of them. This is not a good idea, as discussed earlier. You also need to be wary of signing up for credit cards. While, most are legal, some companies are really towing the line between ‘legal’ and ‘not legal’. Watch out for companies who charge a “membership fee” or have a substantial charge for late fees. So what is the correct way of approaching and dealing with credit cards?
Rule #1 – Never use credit cards as extra money. Always allocate money from your current funds or monthly income in order to pay whatever you finance off immediately.
Rule #2 – Read the fine print. Too many people simply accept the offers sent to them in the mail without reading the details of the interest rate and credit terms. While it may seem insignificant on first look over time it can create a negative financial situation for you very easily. Read the print and make sure you get the best terms available
HOW TO PREVENT CREDIT CARD FRAUD :-
Credit card frauds are very common these days. You need to be highly alert to such possibilities. It’s best that you follow some basic rules to prevent credit card fraud. Here is some tips and advice:-
PREVENTING CREDIT CARD FRAUD :
Sign your Card Sign your credit card as soon as you receive it. Whenever you use plastic money, keep your eyes on it. Don’t allow your credit card out of your vision, if it is possible. Be sure that you are giving your card to the right person.
You must verify his or her identity prior to handing over your card. Be Careful Giving your Account Number You may receive a phone call enquiring about your account number. You should never give your account number unless you have initiated the call after verifying the credibility of the caller.
You should never reply to emails that ask you for your credit card details. At times it so happens that the mailer asks you to visit a certain website to verify your personal information related to your credit card.
You must not trust them. You need to check the credibility of a website before you pass on any information. Don’t put your PIN on your Card Never write your PIN on your credit card. You must shield your confidential details so as to prevent its accessibility to anybody. You need to tear up all credit card correspondence you receive, in case you think they are useless.
You must keep every detail of your bank account in a safe place. Don’t Carry Cards that are Not Needed You need to carry only those credit cards which you use frequently. You are not required to carry all your credit cards every time you are out shopping. Check your credit card bills promptly.
If you find anything wrong, then enquire about it or inform your credit card executive. Destroy your incorrect Receipts Destroy your incorrect receipts. You should never sign a blank receipt after using a credit card. If you use a carbon paper, destroy it immediately after use. It is always preferable to carry your credit cards in some small pouch. Don’t let others use your Card You must not lend your credit card to anyone. Whenever you move to somewhere else, you are required to notify your credit card issuers about it in advance. It is possible that even after taking precautions, your card gets lost or stolen. In either case, you need to contact the issuer immediately. Most of the organizations have round the clock service to deal with these sorts of emergencies. The technology of plastic money has many advantages. But there are a few loopholes too. Whenever you use a credit card, you must keep these points in mind, otherwise you might risk being a victim of credit card fraud.
References :
http://www.moneyexpert.com