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Understanding Credit Cards

A credit card is a device, usually a plastic card, that acts as a conduit for purchasing or for other uses, instead of cash, that gives the holder (owner) the right of its use when presenting it, if the proprietor accepts the credit card instead of cash for payment.

The proprietor then forwards his bill to the issuing credit card company which, in turn, sends the cash to the proprietor, usually electronically to a bank account that is set up to receive the funds.

The card holder is expected to use due diligence in the repayment of the money that was used to the issuing credit card company, usually as a monthly payment with added interest or for the whole amount that is due on a certain date.

The monies used (borrowed) is paramount to a loan or cash advance and there is usually a limit put on the amount available. To obtain the credit card, the holder has to make an application and it is granted, or not granted, based on his credit history and certain other criteria.

Making charges on the card is done by swiping it through an electronic device that reads the information (the credit card numbers) that is stored on the card, or the card number can be given verbally, or typed on the computer and sent over the internet.

For security reasons, keeping your credit card number out of the public forum is a good idea. Because of identity theft, millions of dollars of bogus charges are made to unsuspecting card holders every year.

The credit card can be used wherever it is accepted up to the amount of the credit charge limit. Some credit card companies allow a cash withdrawal from the card account while others only allow purchases.

A credit card makes it possible for consumers to “revolve their balance” by making minimum payments but with interest charges compounded daily, it takes a much longer period of time to pay the card down to a zero balance.

Credit cards are very useful in today's fluid, fast paced, economy because they can be used for emergencies or other unexpected incidents, or for purchases when cash is not available.

Interest rates on credit card balances are regulated by law, even though the interest is usually high.

Most major banks, some credit unions, department stores, chain stores, oil and gas companies, and other retail establishments offer credit cards and many smaller stores are starting to go the way of credit cards, prompting some people to talk of a day when cash is eliminated from everyday use.

Enjoy rewards and perks with your credit cards.

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