free credit

Credit Cards

According to Wikipedia, the online encyclopedia, "A credit card is a system of payment named after the small plastic card issued to users of the system." In the United States the use of credit cards began in the 1920s. The Universal credit card issued by Diners Club Inc. in the year 1950 was the first card to be used in stores and other businesses. In 1958, American Express brought out its card as well, followed later by bank credit cards. The banks would credit the account of the merchant as soon as the sales slips were received, and the amount would be billed later to the credit card user.

How many credit cards do you need?/h3> The ideal number of credit cards varies from one individual to another. The onus is not on the number of cards a person owns but the balance between debt and credit card payments. The credit cards you own should not have a negative effect on your credit report and that is the way to find out just how many cards you need. While analyzing your loan application, your lenders check your debt-to-income ratio. This is done by considering the maxed out value of all your credit cards; in other words, if you use all credit available on your card, what impact will it have on your debt-to-income ratio? If you have too many cards that can negatively impact this ratio, you could consider closing some unused accounts. You should also keep your credit utilization to less than 30 percent – credit utilization being your debt divided by your credit availability. If you have just started using a credit card, one card should be enough until you get a hang of things.

How to pick the right card

Credit cards are mainly of three types:
  1. Bank cards are issued by banks. Examples are MasterCard, Visa and Discover Card.
  2. Travel and Entertainment cards are issued by companies other than banks – for example, Diners Club or American Express.
  3. House cards are issued by retail stores – for example, Sears
Apart from these major categories there are the affinity cards. These cards have reward points for customers each time they use the card. The reward points can be used to buy merchandize or to save on certain purchases. The aim here is to build brand loyalty. The card to pick depends on your specific individual needs. The type of card that is right for you depends on your financial situation and your repayment method. Here are a few points that could help you pick the right card.

If you have a lot of debt to pay off, try to look for cards with low interest rates.

If you are very regular with your payments and make them monthly, you must look for a card with no annual fee, for if you pay regularly, even a high interest rate will not affect you.

In case you are neck deep in debt and wish to find a way out of it, look for cards that have an introductory offer of zero percent interest rate. This offer is valid only for a short period of time. After switching your balances endeavor to repay the debt within the offer period.

In case you’d like something in return for your credit card purchases you can use a card that offers reward points. However, you must remember that the reward cards may have higher interest rates and annual fees. So if you are a shopaholic you should opt for a reward card.

How to apply for a credit card

Applying for a credit card is easy and simple. Once you have identified your needs and the type of card to choose, you can start the application process. The issuer of the card will check your credit history before proceeding further. You will be required to fill out an application either on paper or online, furnishing information like your name (first and last), date of birth, mailing address, phone numbers (both home and work), social security number, annual income, employer’s name, signature and the date of completion of the application. This information is then used for further inputs, by obtaining your credit report. Processing of the application may take a few days to a few weeks depending on the issuer. Sometimes the issuer may ask you for further information, which may delay the process. If your application is rejected for some reason the issuer is supposed to send you an explanation for the same.

Secured Cards

A card that is secured by the card holder’s deposit account is called a secured credit card. A card holder may be required to deposit anywhere between 100 and 200 percent of the total credit. These cards are good for those with a bad credit history since they would find it difficult to obtain unsecured credit cards. If the card holder defaults in payment the deposit will be used to write off his account.

Prepaid Cards

A prepaid credit card is not really a credit card. It is the card holder’s money which he can spend via the card. The card holder will deposit money with the issuer and use only this balance to make purchases. He can only make payments out of his balance and cannot use any credit. It works for those with a bad credit history.