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Our society depends so much on credit, setting a monthly budget just doesn't seem to matter anymore. Having the luxury of an easy and hassle-free spending alternative makes it too easy to buy the things we want, without saving for them. Credit cards can make shopping easy. But hassle-free? No way. Credit cards might seem like the pot at the end of the rainbow to small kids, but in reality, they are more like tiny bankers in our pockets. We are tapping into a loan with each purchase, and while that allows us to make impulse buys (not a good idea most of the time), it also makes it easy for the "banker" to charge us interest. The short-term benefits of having the credit have long term consequences of paying off the "loan" before compounding interest kicks in and starts hurting. Credit cards are getting easier to obtain, too, and the process involves submitting an application that acts as an agreement between you and your credit supplier. If they approve of your application, you will shortly receive your card in the mail. The supplier will set a pre-determined limit on how much you may borrow at a time, and up to that limit, you can purchase goods or access cash from their "bank." Most credit card firms place a limit on your monthly spending. The flipside of the plastic card has a magnetic strip which is encrypted with coded security and demographic information. The information held in the strip is transferred during a transaction to the retailer's machine to allow it to communicate with the card supplier and authorize your payment. Millions of retailers accept credit cards. You can also use the card for purchases over the telephone or on the Internet, depending on the merchant's ability to accept payment of this kind. Finally, credit cards can also be used at ATM cash machines to withdraw cash from your credit card account. There are seven main credit card organizations that operate in countries around the world. VISA, American Express, MasterCard, Citi, Diners Club, Discover and JCB. The most widely used and universally accepted cards are MasterCard and VISA. Some credit card suppliers will partner with particular retailers and organizations to issue credit cards on their behalf; for example, the HSBC VISA card. Going to a traditional retail store and making a purchase will require you to "swipe" your card through the slider on the side of the small machine at the check out register. The store clerk will handle the rest. Buying goods on a web site means you will need to type in your credit card details on the site itself. Make sure the site you are visiting has a secure "lock" image in the bottom right corner of your browser. This indicates the site is a secure place to purchase. You will get a receipt for this purchase from the web site, and also a mailed bill from your credit card supplier with your monthly statement. You can choose to pay your bill off in full, taking your balance down to zero, and you will not be charged interest. Some people choose to make only a partial payment, in other words, not paying off the full amount of their purchases made during the previous month. If you do that, you will be charged interest. And interest generally is applied retroactively to the day you made the purchase. If you make several purchases, or buy things that are expensive, the interest can add up surprisingly fast. This is how the card companies earn their revenues. They also sometimes charge late fees if you fail to pay some or all of your bill by the due date. There are definitely convenience factors attached to carrying a credit card. However, the convenience must be balanced against the high interest rates, and potential for making purchases we do not really need, but rather merely desire in the heat of the moment. The best advice is to pay your monthly card bill off in full every month, even if it is hard to do. Thus you will have all the convenience of using the card, without the pain of the high interest rates.
Article Source: http://www.philvault.com
Robert Jonsonn is a columnist for various popular online magazines, on health news and consumer guide themes. You can get a unique content version of this article.
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