What is a Credit Card?

There is no doubt that we are currently faced with tough economical times. With the current economical recovery still in process, the after shock of the recession is still being felt by the tax payers, especially on their wallet. More job shortages, reduction in payouts, and rising expenses have made it much more difficult for the mass public to be able to keep up with basic expenses, let alone try taking out any money for future savings. Due to the lack of liquid funds available in nearly every household, many people have been seen referring to different forms of credit; the most common choice being credit cards due to how easy it is to get hold of one.

There are a number of different credit lines available in the market today. Depending on the purpose behind your use, one would be seen as a better option over the other. Loans are seen to be the most favorite in terms of choosing a credit line; however they are only popular where large amounts are needed. Credit cards are a mini version of credit loans in all ways. The credit limit that you are given is much smaller and the time that you are allowed to repay the amount is also much smaller. A credit card in general looks like an ordinary debit card. It will have a magnetic strip reader on the back of the card and a small chip towards the front where your name and other details will be printed. The magnetic strip and chip ensures that you can use this card at an ATM machine and all other shopping locations where credit cards are accepted. In the current day and age that also includes the Internet.

A credit card basically provides you with a monthly limit that you can use as an allowance. Even if you have no money in your account, you are able to use the card for purchases and services up to an agreed amount with your lending company. The amount of credit limit that you are granted is known to be based on a number of different factors which include your previous credit rating and how much you can afford which is based on your source of income.

One thing that many tend to over look in relation to credit cards is that even though you are given a credit limit to spend, you are also required to repay the amount back with interest. How much you are required to pay and in what period of time are all dependent on the terms and conditions of your contract. The common mistake that most people are known to fall into is over looking the importance of reading the fine print agreement. What most credit card customers do is simply look at the credit limit they are being granted and commit themselves to the contract. This however is not an ideal approach. The importance of reading and understanding all the terms and conditions before signing the agreement form can not be stressed enough.

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