Credit cards are shiny platinum cards issued by a bank or building society and are forms of borrowing. The majority of us have seen one of these cards in our purses. However, they are not always good news. The following article is a guide to help you understand credit cards in more detail and what you need to consider when thinking of applying for one.
The credit card idea
Credit cards are often used for purchasing items, for cash withdrawals and balance transfers. However, although they give that initial buzz of financial independence and financial freedom to buy whatever you want, they do come with a catch. Interest rate All credit cards have an interest rate and this is an important element to consider when you want to apply for a credit card or for a visa card. Credit cards APR varies from bank to bank and it is mandatory for the lender to display this information before any transaction is made. This article discusses the advantages and disadvantages in applying for credit cards so that you fully understand both sides.
Advantages On the positive side, many banks and building societies will offer interest free charges or 0 interest cards for a fixed period of time and on certain transactions. Such cards would include 0% balance transfer credit cards which offers free balance transfer from credit card to credit card for a fixed period of time. Additionally, you have the option of 0% purchase credit cards that have no interest charged on the purchases you make. The amount of interest you will be required to pay for having your credit card will be displayed as APR or annual percentage rate and usually ranges from 6.9% typical APR to 39.9% APR. This will vary according to the amount you borrow. The main advantage with credit cards is the increase in spending power they offer. They can help with emergencies and can help younger people develop stronger codes of ethics when faced with credit cards. When there is low APR credit and when credit cards are used appropriately, they can be a short-term solution to a long-term problem.
Disadvantages There is the tendency to buy excessively without paying attention whether they will be able or not to pay the debt accumulated when purchasing with credit cards. In turn, this leads a lot of people into debt and finally to be unable to repay, causing problems with the economic balance and with personal credit too. The real problem with credit cards is that the owed amounts must be paid back and the more you spend, the more you need to pay back. Therefore, one needs to control ones credit card spending.