The Benefits of Credit Cards
Credit Cards allow responsible financial adults flexibility in their spending habits and to cover unexpected expenses. Credit Cards work on an annual rate of interest that is charged on the money you use/carry on the card.
This is known as the APR (annual percentage rate). Most credit cards work on a fixed rate but some will work on a variable rate that is usually tied to the prime interest rates. Interest on purchases usually does not occur until after a grace period. Usually a credit card user has one month in which to pay off the balance of their purchases before interest starts to accumulate After that, it will start to accrue interest a rate equal to the APR. If it’s compounded monthly, then you’ll be charged interest at the APR divided by 12 months. Your APR can change. Your credit card company can increase it or decrease it based on their plans. Additionally your credit card rate can increase if you miss or are late with payments. This is one reason you need to be very efficient with paying off your credit card. The interest rate can rapidly grow and make your debt unmanageable.
The Benefits of Using Credit Cards
- Growing and Establishing Your Credit - Credit cards are usually the first method young adults can use to help build their credit rating. It’s an important step as building a strong credit rating is important to receive excellent rates on car loans and mortgages. Additionally credit scores are being checked for jobs and for rental applications. Some credit card companies may get students stuck in spirals of debt, so it’s important for young adults growing their credit rating to be responsible and ensure they are only used when necessary.
- Making Online Purchases - Credit Cards are one of the most convenient ways to make purchases online. As long as you are using a secure website, then you can make purchases and keep your personal information safe. In addition if you are making online purchases it’s likely you are using online banking. You can immediately check your purchases on your credit card through your online banking.
- Fraud Detection - Fraud can happen when using credit cards. Sometimes people may access your credit card number through various methods and then will attempt to make purchases on your account. Credit Card companies have built in fraud algorithms and divisions looking to prevent fraudulent purchases. In addition it’s important to immediately report any charges that you deem are fraudulent. For obvious ones, the company will immediately take action. For example if a credit card company determines that incorrect information has been used like names and addresses, they will likely immediately stop the transaction. For cases where correct information is used, but may look at locations. If the card is being used in multiple locations that can’t conceivably be reached in a single day they will stop the transaction as well. Beyond that the companies will investigate your claims and ensure people are not getting away with credit card fraud. Perpetrators will be reported to the authorities.