Credit cards are among the most important purchases that a consumer will make in a lifetime. These cards can literally help shape a consumer’s financial life. Consumers rely heavily on their credit cards, because without them it would be virtually impossible to conduct a basic level of business. The credit cards decisions become critical to the survival and profitability of every single business.
Many consumers who carry debit cards work very responsibly with them. In fact, many credit cards work quite responsibly with debit cards as well. A credit card is just a payment instrument issued to consumers to enable them to pay for goods and services on line, or by direct deposit to a bank account. If the consumer cancels a credit card before it is paid off, then the cost is charged to the credit card like any other charge.
It is this very accountability that can help consumers build credit faster than they might think possible. This accountability also helps to build credit more slowly than most people are accustomed to. For example, if you use a credit card to make purchases, you have to make timely payments to ensure that you receive your purchases. By not making payments on time, credit cards work against you, because credit cards work to limit your spending. Credit limits are also a key component in helping consumers build credit.
If you do not have credit history, or a history of making payments on time and in full, you will need to find some way to start building your credit. There are many different ways that consumers can go about building credit. Some of the options available to consumers are things such as getting a credit card with no annual fee, or zero percent interest introductory rates for the first year. One of the best ways to start building credit responsibly and to build a history of on-time payments is to get a prepaid debit card. A prepaid debit card will allow you to manage your money without having to use a credit line, and it works just like a standard checking account.
Prepaid debit cards can be used for things such as gasoline purchases and car repairs. Because these cards do not report to credit history agencies, consumers can also use them for their everyday expenses and make timely payments. Another way that consumers can use these cards responsibly and build a credit history is to use secured cards. Secured cards are just like debit cards, except that they require the consumer to put up collateral for the amount of money that they want to purchase. The collateral is returned to them in the event that the consumer does not repay the loan.
These types of cards work very much like a bank account. You are issued a debit card with an assigned phone line and specified spending limits. You can use these cards for telephone calls, internet access and purchases over the phone, similar to a credit card. Some banks offer secured credit cards directly to consumers through their websites. In order to take advantage of this type of service, you’ll need to open a bank account. If you don’t already have one, you can apply online by filling out a simple application form.
Many of these types of cards are reported to three credit reporting agencies, which are Experian, Equifax and TransUnion. This enables you to monitor your credit history and credit rating. If you pay your bills on time and in full, you will receive a grace period that allows you time to repay the balance before interest charges begin. During the grace period, the interest rates will not increase. In addition, if you make new purchases during this time period, the interest charges will decrease immediately.
Credit cards allow consumers to manage their money more effectively. When used responsibly, they can be a powerful tool to help consumers build good standing with credit agencies. Proper usage of these cards can lower the chance of acquiring debt and establish good standing with lenders. Consumers should plan to make at least the minimum payments on all cards and use the grace period to repay past debts. By doing so, you will reduce the amount of interest charges you incur on outstanding balances.
