Recently, the amount of credit card users soared to around 77 recent of adults, making the number of credit card holders higher than the number of Individuals with vehicles. And It Is not Just one card per holder, the average person has 3. 75 cards per credit card holder. Credit cards have truly become a necessity In many adults’ lives. Since 1958, when first credit card was Issued for general use, the amount of users has climbed. This card allowed user to pay their balance over a period of time and was called the Bankrolled until 1977, when the name was officially changed to Visa.
Since then, major credit card companies such as Visa. Mastered, Discover and American Express have been doing everything they can to draw in users. Consumers are drawn to the convenience that comes along with holding a card. This can be anything from easy record keeping, to building credit, to security. The concept of lending money through a card or can be traced all the way back to the 19th century. In the earlier days, department stores were known for awarding their most valued customers with a form of credit printed onto an identification card.
Shortly after the Visa card was officially released, a network of bank owners created the credit card that we know today as Mastered. Masterminds arrival was due largely to the amount of success that Visa was having. Following shortly after, the other major credit card companies started to pop up. As the popularity rose, the credit card industry became the subject of much debate. Many felt that the restrictions were too low and the fees were too high. To top it all off, many people using credit cards were unaware of these details since they were written in the fine print that typically went unread.
This left consumers with unexpectedly high bills and debt that they were unable to afford. Between the asses and the asses deregulation thin the industry was blamed for many of these problems. That continued to be the case until 2009, when the United States President Barack Obama signed a bill to put an Immediate stop to the notorious credit card practices. This Involved putting a stop to interest rate hikes, marketing to college aged students and excessive penalties. While it did not completely solve and stop all of the problems, It significantly cut back on the amount of problems that people had.
A good way to think of a credit Is to think of It as borrowed money. The amount of money being loaned to you varies based on the type of card, your credit score and any other factors. For example, a low credit score would have a lower credit Limit but higher Interest rates. After you spend the money It must be paid back In the agreed period of time, If It Is not, then you will begin to accrue Interest that must be paid in order to pay down the principal, and continue to use the balance on the credit card that one obtains, issuing a card is based off the individual’s ability to pay back the money that is loaned out.
Lenders tend to be much more cautious when loaning money to risky borrowers since the money is insecure. Recently, states have seen a decrease in credit risk due to the rising economy. Credit card repayment doubt still remains a problem for specific demographics. For example, woman are more likely to carry a credit card balance than men and 65% of people aged 50 and over pay their balance in full each month. Risk is determined ultimately by pulling his or her credit report. The credit report is a report where lenders are able to see the borrowers past credit history.
The score is numerical and made up from three credit reporting bureaus: Aquifer, Experience and Transition. Once approved, a credit card can eliminate the need for cash for checks by allowing the consumer to use the card or all purchases if desired. Before the card is activated it is important to be fully aware of the terms and conditions that come along with the card. Creditors are required to clearly define the terms of the credit card in the credit card agreement, but it is the cardholder’s responsibility to read and understand them.
Since it is a legally binding document, knowing the conditions of the card is extremely important. While there are many different terms and conditions within the agreement, only a few key will be focused on for the purpose of this paper. One on the first things to be looked for is the annual percentage rate. This is the cost of the credit. An example of this would be as follows: your PAR is 12% which you divide by 12 months, making your monthly periodic rate 1%. Par’s can be fixed, variable or in tiers. The current average PAR is 13. 14% and approximately 48% of card holders find this to be the most important feature.
Beam’s credit card regulations require companies to give the borrower a 45 day notice before any changes in the PAR are made. The finance charge ties into this, it is what is paid to the bank for lending the money. This number depends on both the outstanding balance on the card and the PAR. Another is the grace period. The grace period is the amount of time, usually 30 days, which you can leave the balance on your card without any interest or fees being charged. If you decide to go over the allotted time, then you must make the minimum payment to avoid defaulting. This amount varies from card to card.
Fees can also be included in your balance. Fees and range from late payment fees to annual fees. Late fees add up quickly so they are very important to keep an eye on. Nearly 28% for low and middle income household report paying late fees, this number is down from the amount of late fees paid a few years ago when the economy crashed. Recent studies show that 8% of card holders feel that having no annual fee is the most important features offered with the card. Cash advances and balance transfers are the final two components of the credit card agreement. Cash advance are similar to a cash loan.
Most of the time this includes a higher interest rate and higher fees but it allows the consumer a direct line of cash that is linked to the card. Balance transfers are used to reduce debt. They allow all credit cards debt to be compiled onto one card and paid off in one place, with one interest rate. They can have low introductory balance transfer rates that last a given period of time. One must be careful of too many transfers as they lead to a higher number of credit report inquires which are not There are obviously thousands and thousands of credit cards available.
Some of the most popular being JUMP Chase, Bank of America and Citibank. Finding the right credit card can require some research. While credit cards help build credit and allow for safer purchasing, it is still important to have the right card. One commonly used card is known as the “zero-or-low interest rate” credit card. This card would be used to pay down debt at a quicker pace than a typical credit card with higher interest rates. The only problem with these cards is that after typically 6 months to 1 year, they return to the higher original interest rate.
Reward cards tend to be a type of credit card that many credit card users hold. The average person has two rewards card in their wallet at any given time. This rewards can range from cash back on purchases to discounts or products with department and retail store credit cards. Cash back on purchases came in as the most sought after reward with 57% of cardholders looking for this feature. This card is typically best for someone who makes a majority of purchases on a credit card and pays the balance off monthly. It is important to watch out for annual fees that cut reward benefits and high interest rate that comes along with reward cards.
Secured credit cards differ from most other cards. They are typically used for people who have little or no credit or people who have ruined their credit. If a secured cards is used responsibly, it can help with your credit since secure cards report to all three credit bureaus. High interest rates and security deposits usually come along with these cards to ensure that there will be money available to pay the balance on the card. Student cards are another common art. Credit card companies solicit college aged students by sending literature to them with the information on the card.
Since often times money is short, they are used as borrowed money to get through the expenses of college. Student credit cards are known for high interest rates that leave college students with not only student loan debt, but credit card debt. Students are usually uneducated on the importance of credit but 35% of college students get credit cards. 85% of college students reported to not even know their credit score. Student credit cards are commonly called back with the number of rewards and benefits they offer but if used wisely, can be a wonderful way to build credit.
All in all, credit cards through pros and cons have proven to be an idea that will most likely be forever a part of the future unless technology provides something even more convenient. They provide and ideal amount of convenience and security while helping to build credit, earn rewards and even consolidate debt. They can also cause significant amounts of debt to pile up and ruin your credit score. Being educated in avoiding risks associated with credit cards is an important part of being a card holder.