Credit Cards 101 – Parte Número Dos
Part 1 | 2
April 20, 2005
Cap -@- StopBuyingCrap.com
Before you dive into this article, make sure you know some of the terms that will be used here; if you haven’t already, check out Part One of the article here.
Okay, Let’s Talk Credit Cards
Plastics are wonderful. Have you ever seen those commercial that talks about the wonders of plastic? From products made via plastic materials that ease our lives, medical equipment made with plastic that saves our lives, and many other things that I can’t think of right now, are made by plastic.
Well you know where I’m going at with this. There’s this other “plastic” that we both love and hate at the same time.
Yes, credit cards are often referred to as plastic, since they’re mostly made from plastic cards. (Wow really?)
Yes, really.
So, why do people love and hate credit cards?
I’m glad you asked because there are several reasons for this, but before we get ahead of ourselves, we need to go over the different type of credit cards there are out there. (Yes, there are different types)
The two main different types of credit cards are secured credit cards, and unsecured credit cards.
For a lot of people with bad credit, or no credit history, sometimes a secured credit card may be the only way to establish or re-establish your credit history.
Secured credit cards are cards that require you to open a savings account or deposit a sum of cash as security for your line of credit. The line of credit you have is usually around 50 to 100 percent of your security deposit, although there are some secured cards that require you to pay around an extra 25 percent of your card’s limit. The offers and condition varies from one card issuer to the next, but generally your secure card’s credit limit is 100 percent of your deposit.
For example, the Bank of America Secured VISA gives you a credit line 100 percent of your savings account deposit. So if you deposit $1,000 to the savings account, you will have a credit limit of $1,000.
The obvious reason why major lenders will give you a credit card, even if you have bad credit or no credit is because of the security you have against the possibly that you can not pay your bills. If the unfortunate does happen, they have the ability to recoup some of their lost.
You should realize that even with your security deposit, you still have to pay at least your minimum payment when the bill comes every month.
Secured credit card is mostly for those that are trying to re-establish their credit history, after things such as bankruptcy, judgment, and collections. In time with proper use and responsibility, a secured credit card can be converted to an unsecured card, in which case your security deposit will be issued back to you.
Although secured credit card can also be an option for those without credit, there are also better alternatives out there, especially for students. (i.e. student credit cards, or credit cards from lenders that are easier to get approved from)
Secured credit card is not something that’s too widely talked about, and it will definitely be something I’ll be addressing in the future, but for now I hope that gives some idea on what it is. For those that are interested, I’ll definitely recommend you Google it, and do some research to see if it is the right choice for you.
Unsecured Credit Cards isn’t exactly a term that’s widely used too. Mainly because that’s regular credit cards, and people don’t call it as such. So for the rest of these articles, we’ll be focusing on unsecured credit cards. (We’ll also just refer to them as credit cards, mmkay?)
Again, there are many different types of credit cards (unsecured, that is). There are student credit cards that are easier for students with no credit to obtain; there are reward credit cards that give you products and services when you use them for purchases; there are business credit cards, cash back credit cards, airline credit cards, department store credit cards, etc. etc. The list goes on.
They come in all sorts of funky design and colors, and they also come in different credit card networks. (VISA, MasterCard, Discover,
etc.)
They especially come in all sorts of different terms and condition, different annual percentage rates, different grace periods, different minimum payment amount, different introductory rate period, and many more.
At many times, credit cards can be an extremely convenient way to make payments on products and services, but at another time, they can also be an incredibly big burden on those without the discipline in their spending habits.
In the upcoming Part Three, we’ll go more in-depth into the world of credit cards, and explore what they have to offer, and the potential financial burdens they may cause.