How Credit Works

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How Credit Works

This is how a credit card works.  When you apply for a credit card, a credit card company issues you a card.  The card comes with a “credit limit” or the maximum amount you may charge to the card.  Then every month you will receive a statement detailing the charges you made for that month.  Many people discover that this statement can be very beneficial, especially if you are creating a personal budget.  The statement shows you how you have been spending your money.  It also includes a bill to be paid for that month.

Credit Cards Work for You

One of the most beneficial parts of holding a credit card is your ability to get a cash advance.  A cash advance allows you to get cash right away, usually from a local designated ATM machine.  The withdrawal amount is then placed on your credit card statement for the upcoming month.  No waiting around for a loan.  You have your money and you are on you way.  A cash advance is easy and simple.

The ability to carry forward your credit card balance can be a real bonus.  Hopefully this won’t happen to you, but maybe at end of a month you find yourself short on cash.  Unfortunately, some expenses came up that you hadn’t planned on.  You might not have enough cash to pay your entire credit card bill.  Don’t worry, because if this did happen to you, you are covered.  By making the minimum monthly payment, you have fulfilled your obligation to the credit card company and you can make your complete payment the following month when you have more money available.  As long as you make the minimum payment, you may use your money on other more important things in your life.  You don’t have to call or stand in line to discuss why you are making a minimum payment.  It is your decision how you want to spend your money each month.

Increasing your credit limit!  Once you have acquired a credit card, you will be given a set limit for charging.  That means the credit card company will inform you of the maximum amount you may charge.  As you time passes and you continually make your monthly payments, credit card companies many times evaluate individual’s credit card histories and will notify you of an increase in your credit limit.  It’s like getting rewarded for something you just naturally do.  This increase in credit is very helpful, especially when life throws you a curve ball and you need a boost of cash.

Credit Card Tips for a Financially Wealthy Life:

 

• Look around for credit card terms that work for you.

 

• Avoid impulse spending on your credit card.

 

• Pay credit card bills as they become due to keep the finance charges low.

 

• Save your credit card for a money emergency.

 

• Keep a list of the credit card numbers the company telephone numbers of every card in a safe place, just in case your cards are stolen or lost.

 

• Only carry cards you are currently using.

 

• Don’t give individuals your credit card information or numbers over the telephone, unless you can verify who you are speaking to.

 

• Check and see if your annual credit card fee can be waived.  Many credit cards have reward points that can be earned throughout the year which can be applied toward the annual credit card fee.