Introduction To The Credit Cards
Welcome to the introduction to credit cards brought to you by can Joe calm credit cards are one of the most misused financial instruments out there. They are also very important and I’d like to talk about why credit cards are relevant? what are some of the fees associated with them? how can you minimize these fees keep more of your hard-earned dollars in your pocket?
Difference between a debit card and credit card:
A debit card is linked directly to your bank account when you use the money on a debit card you’re not borrowing any money. There’s no interest rate you make a payment your bank account is the payment is deducted straight from your bank account and that’s pretty much the end of it.
With a credit card it’s a little bit different you’re actually borrowing money from the credit card company at a predetermined interest rate. So when you use a credit card your bank account balance does not go down instead you owe money to the credit card company. So that’s the major difference between a debit card and a credit card.
You’re probably wondering why would you ever use a credit card if you have to pay interest on the credit card. You don’t have to pay any interest on the debit card well that’s a really good question and there’s actually a bit of a catch that explains that catch is called the grace period.
What is a Grace Period?
All credit card companies have a period during which you are charged no interest on any purchases that you make. This period usually lasts between 20 to 25 days although it varies from card to card. It’s important to understand what the terms are for your specific credit card.
So if you pay off your purchases then this is a great way to build a credit history without incurring any interest payments. You’re paying for the goods that you purchased and the credit card company is not making any money off of you. That’s a good thing but here’s the catch this grace period only applies if you do not carry a balance from month to month if you don’t pay your bill off in full you may be charged interest and remember credit card interest rates are very very high.
So this is not a good thing to have and it’s always good to minimize the amount of interest that you’re paying. So make sure that if you can’t you’re paying off your balance in full from month to month.
Fees of Credit Cards:
There are four (4) types of fees for credit cards. We will discuss these types in detail.
1.Late Payment Fees
Let’s talk a little bit about some of the fees associated with credit cards. The fee that I was just talking about is called a late payment fee. If you don’t pay your credit card bill every single month you’re charged a late payment fee. So simple solution don’t spend more than you earn minimize your credit card spending pay off your bill in full and you won’t be hit with late payment fees. That is a very simple way to keep more dollars in your pocket.
2. Annual Fees
The second thing you can do reduce your annual fees some credit cards will charge these annual fees $20 or $50 a year. There are a large number of credit cards that don’t charge a fee. So take a hard look at each of your credit cards are you paying an annual fee for these card chances. You can get the same benefit without having to pay the fee.
3. Over The Limit Fees
The third thing is the over-the-limit fees each credit card has a limit of $5,000 for $10,000 that’s the maximum you can spend. If you spend more than that, you’ll be hit with an over-the-limit fee, and a simple way to avoid this don’t to spend more than the limit.
4. Cash Advance Fees
It’s really that easy finally, there are what are called cash advance fees. This is incurred by using your credit card as an ATM. If you go to an ATM and you use your ATM card there’s usually a very nominal fee or no fee associated with that. If you try to take out cash a cash advance on your credit card, you’re hit with a pretty substantial fee. So the best way to avoid this doesn’t use your credit card to withdraw cash using your credit card to purchase goods and services in stores that accept the cards. if you’re trying to withdraw cash using your debit card or use your ATM card that’s associated with that particular machine. So that’s an introduction to credit cards and fees.