Credit Cards - Part One

Credit Cards Are a Handy Financial Tool If Used Wisely

Credit cards can be a neat little financial tool. They come in very handy in emergencies and it's next to impossible to rent a car without one.

The problem with them is that too many people get a sense that they are richer than they really are because of that piece of plastic. If they are still under the credit limit, they think "What the hell" and buy something they can't afford.

Credit card debt in the US runs into the trillions of dollars. They are probably responsible for a majority of the credit problems in this country.

What Are Credit Cards?

Credit cards offer you unsecured credit based on your credit score and ability to repay. It is one of the most widely used forms of credit.

The original American Express and Diner's Club cards where charge cards. You were expected to pay the entire bill every month as it came due.

This kind of card forces you to be more careful with your spending. Now it is becoming more frequent for a line of credit to be attached to them allowing you to pay for some purchases over time.

If you have a great credit rating, you?re probably bombarded with offers of new cards. They usually carry no annual fees, the interest rates are reasonable (as far as credit cards go), you get close to a month"s grace period and there might be some fetching initial offers, such as no interest for 6 months on balance transfers and new purchases. Rewards cards abound and you can get air miles, cash rebates or merchandise.

Those who are not so lucky might have to pay $20 or more a year for a card, the interest rates will be higher and the come-ons less enticing or non-existent. Grace periods may be as short as 20 days. Rewards may or may not be available.

Still others might not be able to get anything other than a secured credit card. This is not really a form of credit. You have to make a deposit first and then are allowed to charge to the extent of the deposit. This kind of card, while expensive, can be helpful in rebuilding credit if you have had problems.

Due to a glut of cards already in the hands of good customers, bad credit risks are now finding it easier to get unsecured credit, but at a price which, unfortunately has gotten higher as a result of the subprime mortgage mess.

Read part two of Credit Cards.