While most people now carry around a number of strips of plastic in their wallets that they may refer to as credit cards, many of them are in fact quite different and not actual credit cards at all.
Let's look at the difference between the three major types of charge cards.
Credit Cards True credit cards give you a line of credit, with the minimum limit of most cards being in the $500 range.
The upper limit could rise to much as $25,000.
Portions or entirety of the balance can be paid each month with a small additional fee based on the card's interest rate.
The limit and interest rate is often determined by the owner's credit rating upon applying for the card, and these may change over time based on usage of the card.
Making your payments on time could result in a limit increase, while not doing so could see your limit fall, your interest rates rise, or your credit line cut off entirely.
Secured credit cards are slightly different, in that while they extend a line of credit, a deposit generally equaling the line of credit is needed to obtain one of these.
These cards are for people with poor credit trying to repair that credit, or who have no credit at all and are looking to establish their credit history.
Charge Cards These cards differ from credit cards by having no spending limit at all, but the balance of the card is to be paid each month, rather than in small monthly payments like with credit cards.
Most charge cards will levy fees against anyone carrying a balance on their card to discourage it.
Charge cards can be cheaper to use than credit cards, but considering the balance needs to be paid each month, it makes one question the actual use of these cards.
Rather than living a month ahead and paying interest on your purchases, it makes more sense to simply live in the present and pay for everything without the use of the card.
Debit Cards These cards are issued from your bank, and allow you to pay for purchases with money from your bank account.
This is a popular alternative to cash, with most stores who accept credit cards now also accepting debit.
These cards can also be used at many ATM's to withdraw cash from your account.
Some debit cards can also be used to make online purchases as well.
Plastic or no plastic? As convenient as these cards are, there's no doubt that all they do is add additional fees to your life that wouldn't otherwise exist.
Debit cards are of course relatively safe, and may not even impose fees when paying for something with them, though they will when using them at an ATM.
Charge cards also discourage overspending, making them relatively safe, but also arguably useless.
Credit cards are really nothing but a siphon, sucking all of your money dry with often ludicrous interest rates, and have unquestionably led to the financial ruin of many households simply living beyond their means.
This is why many consumers consolidate credit cards onto one card and get some control of the card debt.
If you must carry any strips of plastic consider their use wisely before getting tangled up in their web from which you may never escape.
Let's look at the difference between the three major types of charge cards.
Credit Cards True credit cards give you a line of credit, with the minimum limit of most cards being in the $500 range.
The upper limit could rise to much as $25,000.
Portions or entirety of the balance can be paid each month with a small additional fee based on the card's interest rate.
The limit and interest rate is often determined by the owner's credit rating upon applying for the card, and these may change over time based on usage of the card.
Making your payments on time could result in a limit increase, while not doing so could see your limit fall, your interest rates rise, or your credit line cut off entirely.
Secured credit cards are slightly different, in that while they extend a line of credit, a deposit generally equaling the line of credit is needed to obtain one of these.
These cards are for people with poor credit trying to repair that credit, or who have no credit at all and are looking to establish their credit history.
Charge Cards These cards differ from credit cards by having no spending limit at all, but the balance of the card is to be paid each month, rather than in small monthly payments like with credit cards.
Most charge cards will levy fees against anyone carrying a balance on their card to discourage it.
Charge cards can be cheaper to use than credit cards, but considering the balance needs to be paid each month, it makes one question the actual use of these cards.
Rather than living a month ahead and paying interest on your purchases, it makes more sense to simply live in the present and pay for everything without the use of the card.
Debit Cards These cards are issued from your bank, and allow you to pay for purchases with money from your bank account.
This is a popular alternative to cash, with most stores who accept credit cards now also accepting debit.
These cards can also be used at many ATM's to withdraw cash from your account.
Some debit cards can also be used to make online purchases as well.
Plastic or no plastic? As convenient as these cards are, there's no doubt that all they do is add additional fees to your life that wouldn't otherwise exist.
Debit cards are of course relatively safe, and may not even impose fees when paying for something with them, though they will when using them at an ATM.
Charge cards also discourage overspending, making them relatively safe, but also arguably useless.
Credit cards are really nothing but a siphon, sucking all of your money dry with often ludicrous interest rates, and have unquestionably led to the financial ruin of many households simply living beyond their means.
This is why many consumers consolidate credit cards onto one card and get some control of the card debt.
If you must carry any strips of plastic consider their use wisely before getting tangled up in their web from which you may never escape.