Advantages Of Having A Credit Card

People from all around the world are now more inclined to use their credit cards when paying for a product or service at an establishment. This is because of the convenience that credit cards offer to the consumers. Moreover, the use of credit cards are helpful when it comes to urgent situations, such as a sudden trip to the hospital or basically, when you are running out of cash.

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Besides these positive reasons, there are still more factors that make having a credit card more advantageous than most people think. Having a credit card is a good way to manage your expenses on a monthly basis. If you are the type of person who wants to see every transaction detail, receiving a monthly statement is a good way to achieve this. It would be better if you could compare your receipts and statement of account to see whether or not you made the same transactions. This will, most importantly, show if your account is being used by an outside party. If you are faced with this problem, it is again critical to report this as soon as possible in order to relay the information to the people. This will not only alleviate the problem for banks to pay out the faulty transaction but will also prevent more people from experiencing this problem. Having a credit card can also be a good way to borrow for free. Most banks now offer zero percent interest for a certain period of time. This lets consumers shop around town in a hassle free way. Another strong point that credit cards boast is how people, nowadays, can rack up points from their transactions, which can then be used to redeem food sets, airplane tickets, or the like. Probably one of the top reasons why people prefer credit cards over cash is how they can easily bring it while traveling. Bringing a credit card instead of a big amount of money will also ensure you of your safety while traveling. This will let you enjoy your trip while not getting flustered with the hassle of bringing paper money.

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Even with these advantages, having a credit card should still be treated with utmost responsibility. Any person can easily abuse their card with the notion that it can be paid at the end of the month but this should not be the case. It is important to remember that you should only get a credit card if you are capable of balancing it with your source of income.

Credit Card Scams

With the convenience that credit cards bring to the table, more and more people are frequently using this financial tool for their daily consumption. Consumers are now more inclined to swipe their cards for a faster transaction. Even with its advantages, using a credit card may expose you to various problems. Nowadays, a major difficulty most people face is the existence of credit card scams. This is a form of theft or fraud that can be done in different ways. Some may use a software to obtain your account details; some may lead you into sharing your security code (a three digit code at the back of your card); or some may simply just steal your bag, eventually your credit card. At the event that they have your information and credit card details, these scammers use it for their own benefit.

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One may ask how these scammers would even gain access to your signature, an important factor before your transaction can even be made final. Most of the time and without you knowing it, these people could easily get your copy of the credit card receipt. This includes your name, credit card number, and most especially your signature. With this on hand, the scammer can, without any trouble, copy and use your account. At the end of the month, you will just be surprised with the amount shown on your statement of account.

There are ways to protect yourself from these fraudulent crimes. It is crucial for you to not in any circumstance give out your personal information to any random person. If you need someone to know your details beside yourself, always turn to someone you can trust, like a family member. It is also important for you to regularly check and manage your account in order to properly monitor transactions you have made or possibly even more transactions that you have not made. This will equip you with the knowledge as to whether or not you are under a credit card scam. Nowadays, banks provide their clients with e – cards that they can use for online transactions. This would typically consist of a dummy account number that will not easily let other people gain access to your main account.

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Sometimes these things happen even if we apply the best set of protection, as stated earlier. In the event that this occurs, it is best to report it to your bank as soon as possible. It would also be helpful to report it the local authority in order to let the greater population know that these types of people are still existent and actively seeking to basically steal money.

The First Credit Card

The idea of credit has been used in society for a long time, it has continued to develop and sustain the economy as a whole and the spending of the individuals. The first credit card as we know of it today was released in 1946. John Biggins who at that time worked at the Flatbush National Bank in Brooklyn, New York invented it. This bank was the one to issue the first credit card which was called the “Charge-It” program by its inventor.

 

The program worked in a simple manner. The transactions made between the bank’s customers and the business owners were done in the local. These businessmen then deposit the sales slips at the bank and then the bank will now bill the customers. This worked well for both the customers and the business owners. It allowed transactions to be made easier and more efficiently with only a small flat fee that goes to the bank in exchange for these services. The Flatbush National Bank acted as a middleman between the two parties involved in the transaction.

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Consumers with great enthusiasm accepted the first credit card. It became especially convenient for the business owners that frequently travelled. Transactions became easier for them and they did not have to carry around money thus eliminating a lot of risks. Another surprising effect of the credit card was that consumers were spending relatively more when they have the credit card instead of when they are carrying money. This was a bonus that business owners freely welcomed. The overall safety of transactions due to the credit card is one of the main reasons that it continued to prosper.

 

The American Express Company has only followed this credit card seven years after its inception. In 1966 the use of the credit cards gained more momentum when 14 more United States Bank formed the Interlink, a bankcard processing association. This allowed banks to issue a greater number of credit cards, which made it more available and enticing for consumers.

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More and more banks continued to take part in the association; the processing of credit cards became more sophisticated. This allowed banks to take advantage of the economies of scale by minimizing the costs of processing, issuing, settling, and payment. Rules were developed to ensure that the internal system remains in order and intact while the expansion continually grows.

 

68 years from the first credit card, we now see how much it has changed our lives. It has become such an integral part of society that allows us to continually improve the quality of our lives.

History- Plastic fantastic

Credit cards may seem like a new age invention only in use by the newer generations. It is important to note that the credit card actually dates back to the early 1900s. Although it does not seem like it, the credit card has been around for almost a century. It is a common sight in society today for almost everyone to own a credit card. Not a lot of people fill their pockets and bags with money to obtain materials but instead just carry around the portable and handy credit card. The ability of the credit card to allow consumers to immediately purchase an item and pay it off afterwards has been a helpful tool and a look into its history will show how much has changed.

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Before the advent of companies like Mastercard, American Express, Visa and Discover small businesses have already provided their customers with lines of credit. Oil producers originally used these lines in order to provide their shareholders a chance to extend their credits. Those who are interested to purchase more land in order to expand the business are given this privilege. Groceries and small retail individuals followed the trend, the lines of credit where made available to those who have some form of evidence and proof that they will be able to repay the debts. It is not uncommon during these times that collaterals were taken to guarantee the payment of these debts.

 

The first ever credit card that was issued was in 1946. Created by John Biggins from the Flatbush National Bank in Brookly, New York. It worked almost the same way as our credit cards of today but was still limited to the local area at that time. It was only made available to the bank’s customers and the merchants from whom they made transactions with. It was evident that the expansion of the credit card was inevitable.

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Once numerous United States banks formed organization to interlink their customers the use of credit cards boomed. This allowed more consumers and merchants to make utilize the convenience offered by the credit card. As of today, almost every business no matter how big or how small accepts the credit card. Consumers from different brackets of income have also utilized the credit card. The purpose and the idea behind the credit card remain in tact.

Consumers have to remember to be prudent and careful in their spending and not abuse the convenience of the credit card. The idea of the credit is to defer payment only up to a certain time before charges are made and consumers must always be aware of this.

 

Credit Card, Is It A Thumbs Down?

What are the disadvantages of having credit cards? First of all, are there any disadvantages to it? Or are we just the benefactors of this wonderful gift of the world? But what are credit cards? Credit cards are what we use to delay the payment of our purchase. Credit card companies are sort of loaning you the money to pay for what you wanted to buy, in return, you get to pay them later but with an given interest rate. Now that we know what they are, are there any negative factors that we can get from these said plastic heroes of our time?

Credit cards may be a disadvantage.   Image taken from: HappySmarts

Credit cards may be a disadvantage. 
 Image taken from: HappySmarts

Well if you are the type of person who really spends a lot and do not have the money on you, but you are sure that you will get the money at the end of the month or every 15th, well then this is for you. Some people who are sure about the amount of money that they have are coming and just have a lot of expenses to pay for during the middle of the month, prefer the convenience of a credit card.

But not all of us are like this, some people abuse the fact that credit card companies allow you to pay later, and tend to “spend money they do not have” and find themselves in more debt than they’re already in. These people tend to over use their card. For example, they use it on unnecessary things like buying clothes or shoes that they do not particularly need at the moment or upgrading their gadgets just because there is a new model that is out. They do this just because they tell themselves that they still have until the end of the month to pay for it.

Credit cards may lead to overspending. Image taken from: The Re Knee Blogspot

Credit cards may lead to overspending.
Image taken from: The Re Knee Blogspot

Another disadvantage that credit cards have is the safety that you are compromising. Your credit card details can make or break your financial stability and also your safety because they contain a lot of personal information. If your credit card is stolen, the person who has stolen your card can use it just by knowing your credit card number. They can use this information for online shopping and they can just spend all they want because they are technically not spending any money at all. Also, by knowing the credit card details, they can just enter this in a database and find out other personal information like your address and your real name. There might be disadvantages to credit cards but the pros sure weigh out the cons in this argument.

How to do Debt Consolidation?

  • GET A CREDIT REPORT

Any loan that you apply for a credit report will always be requirement so if you are planning on getting your debts consolidated then your first step is acquiring your credit report.  This will help decide the loan issuer of your approval.  If you have good credit reports then there shouldn’t be any problem of you being approved of a loan, however, if your credit report is just average or quite poor, then adjustments might be done for you to be approved of a loan.  Before you submit your credit report you also have to put effort in checking it and confirming that all the recorded data are accurate because mistakes and inaccuracies may greatly affect your approval for a loan.

Credit report will be checked. Image taken from: The Lenders Network

Credit report will be checked.
Image taken from: The Lenders Network

Before you decide into anything, you should at least understand these 3 ideas, the Consolidation Loan, Debt Management and Debt Negotiation.

Consolidation Loan is putting all of your loans or debt in one whole loan this way you only pay one loan.  Once you consolidate your loan, you now owe a new lender and usually this new loan incurs to a higher interest rate that those of your past loans but it extends the amount of time you can pay your debts.

Debt Management Programs work differently but it still reduces ones payments.  A debt management agency is present in this situation and they act as a “middleman” between your creditors and you.  Their job is to negotiate with your creditor about your interest rates and other fees inclusive in your loan.  You  pay the Debt Management Agency of the agreed amount and they will be the ones to pay your creditors.  You undergoing Debt Management Program will be seen in your credit report and this will affect your credit rating.

Debt Negotiation is when you settle a debt that is less than what you really owe.  Because of the negotiation done, you pay a part of your debt to your creditor while the rest is to be shouldered by your creditor already.  You will end up paying less and debt free but this process will damage your credit ratings really bad.  Although this process is not often approved and happens only in some cases.

  • RIGHT LOAN

Shop around for the best deal that there is and do not settle for the first offer you get.  You must also set a goal of paying off your loan quickly.

Choose the best loan offer. Image taken from: FastWeb

Choose the best loan offer.
Image taken from: FastWeb

Understanding Credit  

bus3zThe word credit stems from the Latin words Credo or Credere, which literally means to believe. In times today, credit is used in fields of banking, accounting, and finance. It denotes the trust that permits a party to provide resources to another party where the reimbursement procedure is not done immediately. Reimbursement is done on a pre-arranged date. The resources mentioned here usually refer to financial resources but also encompass this by including goods to be paid or services to be rendered. Any form of payment that is deferred will fall under credit.

The word credit is not used in finance and banking.

Image taken from: The Telegraph UK

The two parties involved in the transaction are called the creditor and the debtor. The creditor is the one who extends credit to the other party and the one receiving this credit is considered the debtor.

Some ideas regarding the credit card that is in practice now have been in practice even before. For one to continually be able to make transactions, he must have a good credit rating. This means that the consumer is able to pay back whatever the resource he owes at the time he or she promised to do so. This ensures that rapport is maintained between the contracting parties. If one fails to make good of his or her end of the transaction will taint his or her reputation. One may not easily obtain the further use of credit if that occurs.

Credit during the early times was mainly in use during small transactions between a few number of people. It is only in the 1900s that the use of credit expanded giving way to the tool we are all familiar with today, the credit card. It is in the advent of the credit card that the use of credit has been maximized and used to its full capacity. The creation of the credit card and its development allowed for a wider set of people to make use of it. More consumers had access to more credit while more businesses accepted this form of transaction. This allowed people to make their previous business processes more convenient.

The development of credit from its early times has made it less risky for its users. The consumers no longer face the risk of losing money either through crimes or ineptness by only making use of the credit card. Transactions also became easier and more verifiable for the merchants. The idea of credit is definitely a win-win situation for any two parties making a transaction.

 

Credit Card Advantages

  • SPOT ON CASH
Credit cards can serve as instant cash.  Image taken from: Gadoxo Graphy

Credit cards can serve as instant cash. 
Image taken from: Gadoxo Graphy

The biggest advantage of owning a credit card is that it becomes instant cash.  Through a credit card, you can purchase an item at an instant and pay it later.  Some credit card companies even allow you to pay it by parts and for a period of time.  With a credit card, you can buy what you need right at an instant or with just one swipe.

  • KEEPS RECORD

Anything that you buy using your credit card will be reflected in a record of purchases. This way you can keep track and monitor the transactions that has been done using your credit card.  If you see anything that is suspicious, or you do not remember purchasing that item and yet it appears in your record then you can report it right away to your bank so they could double check it.  Keeping a record of the purchases you made is helpful especially when you are already doing accounting for your purchases and remaining money.

  • REWARDS
You can earn rewards from your credit card purchases. Image taken from: Banking Sense

You can earn rewards from your credit card purchases.
Image taken from: Banking Sense

A lot of credit card companies offer incentives and has a reward system for their clients.  Every time you use your credit card, you earn points and these points can be converted into different rewards offered by your bank.  Some people are able to get free or discounted plane tickets because of their credit card points.  Others get discounts in a lot of retail stores as a reward.  There are some that receives freebies from them creditor.

  • NO BIG CASH

It is quite dangerous to travel or commute with a large amount of money in your pocket but credit cards have made large amount of money transactions easier because you can use your credit card to pay for it.  You do not have to bring with you anymore large amounts of cash.

  • TRAVELLING

Credit cards are really helpful when you travel from one country to another.  If you have a cash with you, you will have to convert in into the currency of the country you are in but if you use your credit card abroad, no conversion needed because you could just directly swipe it and the bank will take care of all the conversion.  It is such a handy tool that you could bring around when you travel and use for all your shopping and other expenses.

Credit cards have revolutionised over time because of the convenience it has brought to us.

 

How to Escape a Debt Trap?

You can still fix your debt and escape the debt trap. Image taken from: Journey To Preparedness 

You can still fix your debt and escape the debt trap.
Image taken from: Journey To Preparedness

Debt is already a fact of life.  In comes in many ways and in a whole lot of different forms. Debt may be caused by a mortgage loan, from your credit cards, overdrafts and others.  These are also the most common causes why some people are buried in so much debt.  Although most have already lost hope, there is still a way of escaping once you fall into a debt trap.

  • TALK TO YOUR CREDITOR

Most people once in the debt trap hide from their creditors and this is a big mistake.  Once you see yourself buried already in your debt, talk to your creditor.  Tell him or her your situation and you can also negotiate of him giving you a more manageable payment scheme to you could pay for your debt even little by little.  You could also discuss to him if there are possibilities of interest rates being lowered or your loan being extended.

If you have a more than one debt then you may try considering consolidating them. Monitoring one debt is already one big headache, what more handling 2 or more debts or loans.   Through consolidating them, you are joining all your debts and loans into one thus giving you the benefit of just settling one whole debt with just one interest rate and one payment per month or according to your agreed terms.  This way, you won’t forget any of your debts and you can monitor all debts at once.

  • STOP SPENDING

If you have half of your body already buried in debt, stop.  You do not have to wait until you are drowning in your debts until you make a move.  Once you see yourself even just going to the direction of it, cut down on your expenses already.  Lessen those shopping and the dine outs.  Cut your little expenses and start being thrifty.  Your debt will just increase and increase you continue your lifestyle.  You should start adjusting so that while you settle your debts little by little, you do not add on it anymore.

You could still clear off your debt, little by little. Image taken from: Make Money in Life

You could still clear off your debt, little by little.
Image taken from: Make Money in Life

Do not lose hope if you fall into a debt trap because surely there is still something you can do to help yourself.  You could also ask your family and friends you have been in the same situation regarding the things they did to improve their situation and remember that a positive attitude will go a long way.

 

 

Avoid the Debt Traps While You’re Young

Financial Institutions target undergrad or graduating students since they are the ones who are about to work and earn.  They are also the ones who do not know much about the ins and outs of finances which is why it is easy for financial institutions they led them into promotional or misleading offers.  This way the would earn money by the fees and other charges that you will be paying.  Usually people from this area are the ones that are still vulnerable from debt traps that is why it is important for you to familiarise yourself even at least with the basic knowledge, this way, you will be able to protect yourself if a financial institution attempts to mislead you into something that wouldn’t be beneficial to you.

  • Bank Fees
Be careful with Bank Fees and other hidden charges.  Image taken from: Clark Howard

Be careful with Bank Fees and other hidden charges.
Image taken from: Clark Howard

Watch out for bank fees that you might be charged of without you knowing.  Since young people are somewhat new in handling their finances on their own, sometimes they do not see the fine print when they apply that they are subject to additional fees and charges, which are often times, very pricy.  So, as a newbie, remember to always double check for fees and charges that they might ask you and never be shy to ask your bank about it.

Control your spending using your credit card to avoid getting into a debt trap. Image taken from: My Budget 360

Control your spending using your credit card to avoid getting into a debt trap.
Image taken from: My Budget 360

That feeling when you first touch your credit card is just so exciting but remember that you must get a hold of your self because the second debt trap is Credit Cards.  Once they get to touch their new credit cards, young people have the tendency of having no limits when it comes to buying and spending.  Since they are new to it, they haven’t really experienced the hassle it brings when the bill comes at your doorstep and it is time to pay it.  Young people are still high and giddy about the fact that they finally own a credit card that is directly under their name.  One must just remember to still remember to budget even in the presence of a credit card.  They should remember their limits and that overspending will eventually lead into a big debt.

These 2 debt traps are 2 of the most common scenarios that young people get into.  You must put in mind that since you are just starting in the finance world, you still have a clean slate and that you have a fresh start in building a good credit record and the moment you fall into a debt trap would mean you damaging your clean credit record as well.