Credit Card – Know Everything About Credit Cards!

Credit cards are products used by consumers to make purchases through credit meant to be paid later. They are easy to access, offer numerous bonuses for using them, and, if enlisted, improve creditworthiness. Credit cards can be used by business owners, employees, homemakers, and students. 

The basic details of a normal credit card include the cardholder’s name, the credit limit allowed, the expiration date, and the CVV number.

What is Credit Card?

Credit cards, also known as plastic or metal money, are payment cards that enable consumers to buy products, acquire cash, and pay interest. They are more like your financial partner, up as personal credit instruments from banks that enable one to purchase goods and services on the understanding that they will be paid at a later date. 

A standard credit card comprises cardinal details like the holder’s name, the line of credit, the expiry date of the card, and the additional security code, also known as CVV. Periodically, users simply have to return the credited amount within the agreed time horizon. Failing to do so leads to interest charges by credit card companies.

Benefits of Credit Cards

Whether you are looking for unmatched cashback, travel rewards, or exclusive discounts on your spending, there is surely a credit card designed just for you.

Explore the Power of Plastic: Swipe, Earn & Done, The Right Credit Can Empower Your Finance Perfectly…

Users of Credit Cards

How to apply for a credit card and get approval?

You can apply directly to the bank or the credit card company via their website or customer service and apply for the credit card. Many local stores offer in-store branded credit cards, so you need to fill out the form and apply for the credit card. 

One of the basic requirements to get approval for the credit card is a healthy FICO score, a regular source of income, and a sponsor in the form of a fixed deposit for non-salaried individuals or the primary card holder in case of an add-on card.

Credit cards play a powerful role when it comes to building your reliable and strong credit profile. Higher credit scores not only improve your credit background and let you apply for a new credit card, but they will also affect the financial services that are being offered to you. 

The best credit card comes with a lot of added benefits and will offer users higher reward rates, heavy discounts, unbelievable travel miles, and lower interest rates on debt. So, keeping the same in mind, it is important to research a lot and to prepare in advance before applying for a credit card.

Here are things to be taken care of when you apply for a credit card:

Check Your Credit Score

To get approval for a credit card, you first have to check your credit score. The credit score is determined by the credit history, balance transfer, credit utilization, and outstanding balance of the consumer, which is a three-digit number. Numbers describe the credit scores in some special categories, such as:

Credit Score	Credit Value
720 & Above	Excellent Credit Score
690-719	Good Credit Score
630-719	Average Credit Score
300-629	Bad Credit Score

Most credit cards are issued when you have a good and excellent credit score, so those who are struggling with a bad credit score have to improve it.

Are you looking to check your credit score for free?

Yes, you can check your credit score for free. You can check your credit score from three of the major credit agencies: Equifax, TransUnion, or Experian. Users are entitled to check credit from these three major agencies one time a year from each agency.  You can get a detailed report at Annual Credit Report.com from each of the mentioned bureaus. Many credit card agencies also offer free monthly credit score facilities; you can check your lender and apply for it.

• Pro Tip: Sometimes, you may receive credit card exclusive offers with massive sign-up bonuses and or extra membership points via mail and other communication channels. 

Find the Right Fit (Credit Card) for You

Finding the right crest card is important. Research a lot when you are planning to apply for a credit card.

There are many kinds of credit cards available, but you have to consider some of the things before choosing the right card for you:

• Rewards Rates: Many credit cards come with specific reward categories; you should choose a card in which you make purchases the most.

• Interest Rates: There are some cards that charge high annual charges, late fees, high interest rates, and foreign transaction fees. Choose a card with no annual fees and no foreign transaction fee.

• Sign-up Bonus: Some credit cards also come up with a huge sign-up bonus for spending some fixed amount. So you can choose wisely a good amount of sign-up bonus.

Learn All Credit Terms

Now, you are in search of a good credit card, so you will encounter a handful of terms that will create hassles when making informed choices. Knowing the terms in advance will help you to choose the right credit card that suits your financial needs and lifestyle.

Some of the crucial terms are given below:

• Annual Fee: This is an annual amount charged by the lenders in the month when the user signed up for the credit card. This fee is charged for using credit cards. Some of the credit cards have a $0 annual fee, while some of the lenders charge more than $95 per annul.  

• APR: This is an annual percentage rate on which your annual interest is decided. This fee is charged when you don’t pay the full amount and carry a balance on your card.

• Balance Transfer: This is the process of transferring your loan amount balance from one credit card to another. This is usually done when you have to transfer your loan from a high-paying interest to a paying interest amount so that you can pay your debt while saving some amount on interest. 

• Welcome/Sign-up Bonus: This is a one-time bonus amount given to a new cardholder after spending a fixed amount within a certain time frame.

• Foreign Transaction Fee: Some of the credit lenders charge an amount when you make any payment using online currency or use your card outside of the USA. You can avoid these charges by choosing a card that comes at a low annual fee.

• Penalty/ Late Fee: A penalty and late fee are charged when you miss a due date of payment or fail to pay the minimum amount on the due date.

Compare Credit Card Offers Wisely

Once you have decided which card is the right choice for you, you can apply for it. But before applying for any particular card, you must compare all the cards that you have added to your checklist. 

You can ask these questions to help you eliminate cards that aren’t a good fit for you:

1. Is it a card that provides the benefits you value most, such as a $0 annual fee, unlimited cash back, or an introductory 0% APR?
2. Have you fulfilled all the credit requirements?
3. Will you meet the requirements for a sign-up bonus, if applicable? 
4. If you intend to carry a balance, does the card have a low APR?
5. Are you satisfied with the fee structure in terms of annual and foreign transaction fees?
6. What is the amount of the security deposit, if any?

Information Needed to Apply for a Credit Card

After all your research and decision-making about getting a credit card, you are required to gather some information.

The information could be:

• Your legal name
• Complete date of birth
• Your Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN)
• Residential address
• Phone number
• Annual gross income
• Your employment status
• #062255

Fill Out a Credit Application Form

The most effective way to apply for a credit card is online. Online applications are the quickest and most convenient because they can be completed at any time and from any location. It also makes the most sense after comparing credit card offers online, which you should definitely do if you want to get the best deal.

Furthermore, it expedites your application to the card issuer and increases your chances of being approved immediately.

FICO score to get quick credit card approvals

Having a FICO score of 750 or more will ensure that you are approved to get almost any credit card that is in circulation. A ‘fair’ credit score of 620 or above may also secure your approval for some credit cards, even if the interest rates or your credit limit may not be the best one. 

For a score of 580 or below, the only option available to you is to take up a secured credit card. 

These credit cards come with an option that demands a security deposit, and in case you fail to honor your commitments, the security is liable to be forfeited.

5/24 rule of credit cards

The 5/24 rule for credit cards states that if you have opened five or more credit cards within the last 24 months, you will not be approved for a new card, regardless of the issuers. This is an informal policy adopted by certain credit card issuers such as Chase.

Types & Profiles of Credit Card Users in United States

Types of Credit Card Users in United States

• Revolver: It refers to individuals who maintain a balance on their credit cards from month to month.
• Transactor: This refers to those users who pay their entire credit balance every month in order to avoid interest charges.
• Dormant: It refers to those users who do not use their credit cards frequently ( in case of emergency, travel insurance).

Profiles of Credit Card Users in United States

Credit card users have a diverse range of profiles, including professionals, self-employed individuals, and salaried employees, as well as working women and homemakers. Credit cards are used to manage daily expenses, travel, and earn rewards.

Professionals

Professionals use credit cards for travel, networking, and professional development expenses. They often use rewards programs to maximize benefits from their spending on conferences, memberships, and business-related purchases.

Self-Employed

Self-employed individuals rely on credit cards to manage business expenses, such as supplies and client meetings. They use cards to maintain cash flow and take advantage of rewards and cashback offers that align with their business needs.

Salaried Individuals

Salaried individuals use credit cards to manage monthly expenses, pay bills, and make large purchases. They often take advantage of instalment plans and reward programs to maximise the value of their regular spending.

Working Women

Working women use credit cards to balance both professional and personal expenses, from work attire to childcare services. These cards offer cashback, travel points, and discounts on shopping and dining.

Housewives

Housewives utilize credit cards to manage household budgets, grocery shopping, and family-related expenses. They often look for cards that offer cashback or rewards on everyday purchases to maximize their household budgets.

Stay-At-Home Parents or Guardians

Stay-at-home parents or guardians use credit cards to cover the costs of running a household, including children’s needs and utility bills. They prioritize cards with rewards or low interest rates to manage expenses efficiently.

Students

Students use credit cards to cover educational expenses, such as books and supplies, as well as personal costs. They often choose cards with low credit limits to build their credit history while learning financial responsibility.

Credit Card Payment Network

MasterCard, Visa, American Express, and Discover are the four main credit card networks. Additionally, Discover and American Express provide their own credit cards. This sets them apart from card networks like Visa and MasterCard.

Here is a quick brief about them:

Visa

There are currently more than 4.4 billion Visa cards in circulation globally, and Visa card is accepted in more than 200 countries and territories. Visa, one of the biggest credit card networks in the world, offers a network for transactions rather than directly issuing cards. They are popular both in the USA and globally.

Master

Master cards are frequently utilized because this card network is operational in over 210 nations and globally. Mastercard is a worldwide payment network, just like Visa. Additionally, it does not directly issue cards; instead, it collaborates with financial institutions to offer the network necessary for credit card transactions.

American Express

This is one of the biggest credit card networks in the world. American Express issues its own cards and runs the payment network. It is renowned worldwide for its premium quality services and better customer service but is not as widely accepted as Visa.

Discover

Discover is one of the most popular payment networks in the USA, and it issues its own cards as well. It is also known for unlimited cashback, an amazing rewards policy, and other perks. Discover networks operate globally in more than 200 countries and have a reach of 345 million cards.

Benefits of Using A Credit Card

Convenience

Credit cards provide an easy and quick way to make purchases both online and in-store without needing cash.

Building Credit History

The responsible use of a credit card helps build and improve your credit score American Express, which is crucial for securing loans, mortgages, and other financial products.

Rewards and Cashback

Credit cards offer rewards points, cashback, and other incentives for spending, which can be redeemed for travel, merchandise, or statement credits.

Purchase Protection

Credit cards usually come with purchase protection, which covers you in case of damaged or stolen goods, offering refunds or replacements.

Emergency Fund

Credit cards serve as an emergency fund, allowing you to cover unexpected expenses when you don’t have immediate access to cash.

Fraud Protection

Credit card companies offer robust fraud protection, monitoring for suspicious activity, and offering zero-liability policies for unauthorized charges.

Interest-Free Period

Many credit cards offer an interest-free grace period on purchases if the balance is paid in full by the due date. This allows you to manage short-term cash flow without incurring interest.

Perks Offered by Credit Card Companies in The USA

• Cashback Rewards: Cashback is offered at certain merchants on all purchases, or it can be advertised as giving a certain percentage of the purchase, such as 1 to 5 percent. 
• Travel Rewards: Award points or mileage that are earned to be used in flying, booking accommodation, and other pertinent expenses for travel. 
• Sign-Up Bonuses: Big extra points rewards or cashback for making some specific number of purchases within the first few months. 
• 0% Intro APR: Providing free interest on purchases for a certain period, usually a range from 12-18 months, on balance transfers. 
• No Annual Fees: Some cards do not charge an annual fee; although the card has it, it is reasonable to use this card for years without any additional payments. 
• No Foreign Transaction Fees: Minimize the foreign charges that may be incurred when using the card when traveling. 
• Airport Lounge Access: Complimentary entry to exclusive airport lounges.
• Purchase Protection: Bought with the card, the damaged/stolen items will be compensated. 
• Extended Warranties: Extra financial protection beyond the manufacturer’s guarantee or warranty. 
• Travel Insurance: These are cancellation and delay benefits, which cover lost baggage, as well as auto rental when one rents a car.
• Access to Exclusive Events: Festivals, musical nights, meal plates, and sporting occasions.

Understanding Credit Card Fees

Here are eight frequent credit card fees and ways to avoid them:

Annual Fee: Many credit cards carry an annual fee, which usually ranges between $95 and $500.
How To Avoid: Choose a card that charges no annual fee, such as the Citi Double Cash® Card.

Interest charges: These interest charges happen when you hold a balance on your credit card and do not pay it off in full.
How To Avoid: To avoid interest, pay off your debt in full each month or get a card with a 0% APR.

Late Payment Cost: If you miss a payment, you may be charged a cost, which can range up to $40.
How To Avoid: Set up recurring payments to guarantee you never miss a due date and avoid late penalties.

Foreign Transaction Fee: Many credit cards charge around 3% for foreign purchases.
How To Avoid: To avoid international transaction costs, choose a card with no fees when going overseas.

Balance Transfer Fee: When you transfer a balance, a fee of 3-5% is usually levied.
How To Avoid: Look for a credit card that does not charge balance transfer fees.

Cash Advance cost: Withdrawing cash from your credit card normally results in a cost of 3-5%.
How To Avoid: Plan ahead of time and use other means to acquire cash.

Above-the-limit Fee: Some cards impose a fee if you go above your credit limit.
How To Avoid: Opt out of over-limit coverage so you can't spend more over your limit.

Returned Payment cost: If your payment is returned for insufficient funds, you may be charged a cost of up to $40.
How To Avoid: To prevent this penalty, make sure you have adequate cash in your account before completing the payment.

Understanding and proactively controlling these fees allows you to cut needless spending and make your credit card work for you.

Understanding Credit Card Interest

Credit card interest refers to a cost incurred by the cardholder when they use the card beyond the due date of the billing cycle credit card. In the U.S., this interest is at a card’s Annual Percentage Rate (APR), which usually falls between 15% and 25%. 

Credit card debt is known to attract interest, and the longer you continue with the balance, the more you attract, making you deep in debt. Interest is compounded daily, so even such an amount is added every day to contribute to the growth of the fund.

If you do not wish to pay interest charges, be sure to pay off the entire amount you owe by the due date each month. 

If you can only pay a part of the balance or cannot afford to pay immediately, you could use a card with a 0% introductory APR or avoid using the card to make purchases, which will only make the balance bigger. The best thing one can do is to ensure that the bills are paid on the due dates. This way, interest charges will be avoided.

Understanding Credit Card Payment Due Date and Grace Period

The credit card grace period is usually 21 to 25 days, during which you can pay off the full balance without being charged interest. Some cards offer up to 55 days. To avoid interest, clear your balance by the billing date. Making only minimum payments can harm your credit score and result in more costs.

Welcome Offers and Bonuses for Credit Card Users

Credit card firms in the United States frequently utilize appealing welcome offers and incentives to recruit new members.

Here’s a more in-depth look at the sorts of incentives you might anticipate:

Sign-Up Bonuses

Example: If you make $4,000 worth of purchases within the first 3 months of using the Chase Sapphire Preferred® Card, you can get your hands on 60,000 bonus points.

Benefit: These 60,000 points can be leveraged for $750 towards travel when such bookings are made through Chase Ultimate Rewards®, thereby increasing the original number.

0% Introductory APR

Example: For 18 months, the Citi Simplicity® Card has attracted users with features such as 0% on purchases and balance transfers.

Benefit: It enables you to settle expensive items or borrowations without incurring interest on the initial period, hence saving you a lot of interest.

Bonus Rewards

Example: The Discover it® Cash Back card provides users with up to 5% on rotating categories such as grocery stores, gas stations, and restaurants, among others, with a cap of on the first $1500 of spending per quarter.

Benefit: This way, you can get the most out of your purchases as the more money you spend within these categories, the more cashback you will indeed get and, therefore, save money.

No Annual Fee for the First Year

Example: The American Express® Gold Card charges $250 on annually, though the card offers the first year free.

Benefit: Fixed-value benefits, such as dining credit and travelling rewards, may be obtained without the initial money, allowing the consumer to decide whether it is worth entering into a long-term relationship with the card.

Travel Benefits

Example: Currently, the credit card, The Platinum Card® from American Express, includes free access to more than 1,200 airport lounges across the globe.

Benefit: Business travellers working for particular airlines can benefit from getting access to luxury lounges as they save on the cost of food and drinks in addition to having the best experience ever.

Referral Benefits

Example: You get 15,000 points for each referral (up to five referrals a year) when your referred person signs up for the Chase Sapphire Preferred® Card.

Benefit: Referring friends opens up another avenue for earning more points, thus increasing your rewards without having to spend more money.

Welcome Gift Offers

Example: There is a Hilton Honours American Express Card, which offers a $100 Hilton gift card upon signing up and meeting specified spending requirements.

Benefit: You get a physical welcome offer, which could be in the form of statement credits towards a hotel you need as a cardholder.

These incentives are intended to appeal to a variety of spending habits and lifestyles, resulting in significant benefits for new credit card users. You may maximize the benefits of these perks by carefully picking the proper deal.

Factors to Consider While Choosing A Credit Card

Choose a credit card and decide whether you want to pay off the debt every month or carry it over. Look for credit cards that offer perks like cash back or points if you pay in full. If not, concentrate on using low-interest credit cards to cut expenses.

Understanding the annual percentage rate (APR), minimum payback amounts, yearly fees, and costs for overseas transactions or late payments is crucial. By comparing promotional deals on interest rates and contrasting reward schemes, you can make informed decisions. 

Use comparison websites for card choices, but remember that applying for more than one card may impact your credit score.

To determine the suitability of a credit card in the U. S. or the need to purchase a credit card, anyone must consider a number of factors.

Here are the key points to consider:

1. Payment Preferences

Your choice of paying off your bills month by month or carrying balances forward is significant.

If you pay in full, look for credit cards that offer perks like cashback and reward points. If you prefer to maintain a balance, consider cards with low-interest charges to reduce costs.

2. Annual Percentage Rate (APR)

The interest rate is displayed as APR. You will be charged if you don’t pay off the balance of your cost every month.

If you have a balance of some amount, compare the annual percentage rates to select a card that provides better rates.

3. Minimum Repayment Amounts

Remember to learn the minimum amount required to be paid so that one is not charged more fees or interest charges.

It is important to know how much money any individual should spend monthly in order to avoid reaching a state of financial emergency.

4. Annual Fees

Particular cards include annual fees, which may range from $95 to $500 or more.

If you want to look for cheap options, it’s preferable to get a card without an annual fee; if not, compare the benefits of premium credit cards, even though they may have a fee that meets the value of the reward.

5. Foreign Transaction Fees

You should especially check whether the card has foreign transaction fees if you frequently travel or make purchases from international merchants—they generally cost about 3%.

For example, if you plan to make transactions in a foreign country, look for a credit card that charges no foreign transaction fee.

6. Late Payment Fees

Failure to pay on time leads to a penalty fee of $15 -$40.Choose cards that allow some flexibility in the payment timeline or even regular monthly payment plans to avoid such penalties.

7. Promotional Offers

This type of card usually offers other deals, such as promotions the card issuer might offer, like an intro rate of 0% APR on purchases or balance transfers.

These offers try to match, particularly if a big purchase needs time to be paid or if the existing balance needs to be transferred with no interest charge.

8. Reward Programs

It’s important to compare the reward schemes, whether it’s cashback, travel points, or any other type of incentive. Choose a program that aligns with your spending habits to maximize its benefits. 

Physically, choose a program that will, in one way or another, affect your spending habits so that you get the most out of the program.

9. Payment Gateway and Acceptability

If you make a cross-border purchase or travel frequently, check that the card is accepted on the Internet and at a physical point of purchase.

10. Interest Rate

If you are likely to keep the balance because you cannot pay it off fully for some time, then you should opt for credit cards with low-interest charges.

11. Card Comparison

To compare the credit card offers, visit the comparison tools online, but only apply for the credit cards in large numbers as this may harm the credit rating.

When a person considers these factors, he or she will be able to select the credit card that is most suitable for his or her financial needs.

Frequently Asked Questions