Managing Credit Cards

Managing Credit Cards

• Review statements monthly to verify entries and pay by due date to avoid finance charges.
• Pay minimum monthly payment or entire amount to avoid finance charges.

Choosing the Right Credit Card

• Consider annual fees, rate of interest charged on balance, length of grace period, and method of calculating balances.
• Compare introductory rates, regular APR, cash advance fees, and late fees among different issuers.

Credit Card Types

• Retail charge cards: second largest category, offered by department stores and oil companies, with preset credit limits.
• Debit cards: work like a check, accessing checking account, with no line of credit and greater liability exposure if fraudulently used.
• Prepaid cards: a type of debit card with a fixed amount, not accessing checking account.
• Revolving credit lines: offered by banks or other financial institutions, with higher credit lines and lower interest rates than credit cards.

Credit Cards and Open Account Credit

• Credit extended to consumer prior to a purchase, with a specified credit limit.
• Offered by retailers and financial institutions, with monthly credit statements and the option to pay balance in full to avoid interest.

Bank Credit Cards

• Line of credit depends on applicant’s financial status and ability to pay.
• Features cash advances, balance transfers, and interest rates and fees.

Fees and Charges

• High interest rates, annual fees, transaction fees, late-payment fees, over-the-limit fees, balance transfer fees, and foreign transaction fees.

Special Types of Bank Credit Cards

• Reward cards: offer frequent flyer programs, auto rebate programs, and other merchandise rebates.
• Affinity cards, secured (collateralized) credit cards, and student credit cards.