Connect with us

Bad Credit

What Is a Credit Card? And Should You Own One?

Published

on

Credit cards let you borrow money from a bank under the agreement that you’ll repay it by your bill’s due date or incur interest charges.

The ability to buy now and pay later outmatches other forms of payment, such as debit cards or cash, which both require you to have the money available for payment at the time of purchase. In addition to having more flexibility with payments, credit cards help you to establish a credit score so you can qualify for other financial products, such as loans and mortgages.

There also can be some monetary perks to having a credit card, where cardholders can earn rewards on every purchase, which can be later cashed in for travel, statement credits and more. Some credit cards also offer intro interest-free periods.

And with laws like the CARD Act and Fair Credit Billing Act that help regulate the industry and provide higher levels of protection against fraudulent purchases, credit cards are more secure compared to other payment methods.

Below, CNBC Select reviews the pros and cons of credit cards, how they work, common terms and types of cards, so you can start using credit cards to your advantage.

What is a credit card?

  • Pros and cons of credit cards
  • How credit cards work
  • Common credit card terms
  • Types of credit cards

Pros and cons of credit cards

Pros of credit cards Cons of credit cards
You can make a purchase now and pay it off at a later date. If you don’t pay your bill in full by the due date, you may incur interest charges and fall into debt.
Credit cards are widely accepted forms of payment. Some merchants may limit what type of credit card networks they accept.
Paying with a credit card is convenient. You’re more likely to overspend with credit cards versus cash or debit cards.
You can build a good credit score by paying on time and keeping a low balance. Maxing out your card or missing payments can cause your credit score to drop.
Many credit cards offer rewards, welcome bonuses and statement credit benefits. You may be tempted to overspend in order to earn rewards or perks.
If your credit card is stolen, you have limited liability ($50 max) from fraudulent charges. Credit cards can be skimmed at gas stations, stolen, hacked online or exposed in data breaches.

How credit cards work

Credit cards are rectangular pieces of plastic or metal that can be used to pay for new purchases by swiping, tapping or inserting your card into a card reader at checkout. Plus many cards allow you to complete balance transfers, which provide the opportunity to get out of debt.

When you open a credit card, you receive a credit limit that can range from a couple hundred to thousands of dollars. You’ll be able to spend up to that limit.

When you make a purchase with your card, it will show up as pending on your account and post within a few days. Once the transaction is posted to your account, your total balance will increase.

Expect to receive a bill from your card issuer every month that consists of all the posted purchases you made during your billing cycle. In order to keep your account in good standing, you’ll need to pay at least the minimum amount by your due date (which is the same date every month).

Thankfully most cards offer grace periods, which allow you to pay off your balance interest free for a minimum of 21 days from the end of a billing cycle. Any lingering balances after the grace period will incur interest, so we recommend that you always pay in full.

Common credit card terms

Credit cards come with dozens of terms that determine what fees you can incur from using your card. Here are the most common terms:

  • Annual fee: The fee cardholders are charged every year for holding a credit card.
  • Balance transfer APR: The interest rate for balance transfers, which may be equal to or greater than the purchase APR.
  • Balance transfer fee: Transferring debt from one card to another may cost you 3% to 5% per transfer.
  • Cash advance APR: The interest rate you incur if you take out a cash advance, which is often one of the highest APRs you can be charged.
  • Cash advance fee: The fee you’re charged for each cash advance, usually 5%.
  • Foreign transaction fee: Purchases made outside the U.S. may incur a fee per transaction, usually 3%.
  • Late payment fee: When you pay your credit card bill late, you may incur a fee up to $40.
  • Minimum payment: The smallest amount of money you have to pay each month to keep your account current. (Learn how making only minimum payments on credit card debt could cost you thousands and take over a decade to repay.)
  • Penalty APR: When you pay late, card issuers may penalize you with an interest rate that’s higher than your regular APR.
  • Purchase APR: The interest rate you incur for new purchases that aren’t paid in full every billing cycle.

Types of credit cards

There are thousands of credit cards available to consumers, making it hard to settle on just one. Thankfully, most credit cards fall within a handful of categories, so you can narrow down your choices. Here are some different types of credit cards:

  • 0% APR cards: Many cards provide interest-free financing periods that can be upwards of a year. The best cards offer 15-,18-, 20- and 21-month long 0% APR periods. For instance, the U.S. Bank Visa® Platinum Card offers 0% for the first 20 billing cycles on balance transfers and purchases, then a 13.99% to 23.99% variable APR applies.
  • Rewards cards: If you want to earn cash back, points or miles on all your purchases, rewards cards are a great choice. You’ll typically earn at least 1% or 1X back on everything you buy, and the best cards provide four times that on a variety of purchases from food delivery and groceries to gas and travel
  • Secured cards: One of the best options for credit newbies or people with bad credit is to open a secured card. These cards work like a regular, unsecured card but require you to make a deposit (often $200) in order to receive a line of credit. Some cards, such as the Capital One® Secured Mastercard® may even provide the chance to qualify for a lower $49 or $99 deposit.
  • Business cards: Business owners can benefit from opening a card with rewards geared toward common business expenses, such as shipping and travel, as well as intro 0% APR periods. Plus these cards allow you to open employee cards, which streamlines expenses.

Information about the U.S. Bank Visa® Platinum Card and Capital One® Secured Mastercard® have been collected independently by CNBC and have not been reviewed or provided by the issuers of the cards prior to publication.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Bad Credit

Letter: Vote for Kiesha Preston | Letters

Published

on

The residents of Roanoke, Virginia, need to get out of the box of voting based on party affiliation. It’s time to vote for the best candidate to do the job.

Kiesha Preston is running as an independent and is the best choice for Roanoke City Council. When she was only three years old, she was troubled because a local Kroger store removed the kiddie carts. She asked me how to get them back so she could shop beside me. I told her to go to the manager and she did. She stated her case, and a few weeks later those kiddie carts were back in the store.

Kiesha also has presented a bill to Congress that was approved. The Virginia Domestic Violence Victims Protection Act prevents domestic violence victims from not being able to rent an apartment because of bad credit as a result of their abuser ruining their credit.

These are but two examples of Kiesha’s tenacity and getting results. We need people on council who have no agenda and are truly willing to work for the least of us.

Kiesha is not intimidated by those in power and will hold her own to help those who cannot help themselves. This is why she is the right person to get the job done.

Please do not be discouraged because you are tired of the same old same old where parties are concerned. You have another choice so please vote for Kiesha Preston. She has been working tirelessly on behalf of the people without being elected to an official office. Just imagine what she can do once she is officially on City Council.

Source link

Continue Reading

Bad Credit

This One Credit Card Will Get You the Most Cash Back Right Now

Published

on

Let’s admit it, choosing the right credit card can be a stressful process. There are so many variables to consider—from annuals fees to credit score requirement—not to mention the various rewards and benefits each card offers, and how those align with your lifestyle and spending habits. Then there are those hidden fees and interest rates you have to reckon with. In other words, it takes a lot of work to make a truly informed decision when it comes to choosing a credit card that’s right for you. Perhaps a good cash back program is high on your credit card priority list because, well, who doesn’t like some extra money in their pocket?

To help you decide on the credit card that is going to get you the most cash back, the experts at personal finance site WalletHub compared more than 1,500 current credit card offers. From that large pool, they narrowed down the field to the cards that offer cash back rewards, comparing those offers based on initial bonuses, rewards earnings rates, annual fees, and more. From that analysis, here are the best credit cards that will get you the most cash back right now. And for more money matters, check out This Is the State Where Your Money Is Worth the Least.

8

Alliant Cashback Visa Signature Credit Card

Best for: Cash back on all purchases

Cash-back rate: 2.5 percent

Annual fee: $0.00 for the first year; $99.00 after that

What kind of credit you need to get one: Excellent

Learn more about the Alliant Cashback Visa Signature credit card here.

If you are worried about having buyer’s remorse after choosing a credit card, put that into perspective by checking out What You’re More Likely to Regret Than Anything Else You Do.

7

Discover It

Best for: People with bad credit

Cash-back rate: 1-2 percent

Annual fee: $0.00

What kind of credit you need to get one: Bad

Learn more about the Discover It credit card here.

6

U.S. Bank Cash+ Visa Signature Card

Best for: Cash bonus for good credit ($200.00)

Cash-back rate: 1-5 percent

Annual fee: $0.00

What kind of credit you need to get one: Good

Learn more about the U.S. Bank Cash+ Visa Signature Card here.

And to make sure you have money to pay off those monthly bills, avoid The Biggest Career Mistake You’ll Ever Make, According to Experts.

5

Chase Freedom Unlimited

Best for: No APR on purchases

Cash-back rate: 1.5-5 percent

Annual fee: $0.00

What kind of credit you need to get one: Good

Learn more about the Chase Freedom Unlimited credit card here.

And for more things that will help you and your family stay on the right financial track, check out The No. 1 Sign You Shouldn’t Buy That House, According to Realtors.

4

Capital One QuicksilverOne Cash Rewards Credit Card

Best for: People with limited-to-fair credit and looking for low annual fee

Cash-back rate: 1.5 percent

Annual fee: $39.00

What kind of credit you need to get one: Fair

Learn more about Capital One QuicksilverOne Cash Rewards Credit Card here.

3

Citi Double Cash Card—18 month BT offer

Best for: Flat-rate rewards

Cash-back rate: 2 percent

Annual fee: $0.00

What kind of credit you need to get one: Excellent

Learn more about the Citi Double Cash Card here.

2

Capital One Savor Cash Rewards Credit Card

Best for: Dining and entertainment

Cash-back rate: 1-4 percent

Annual fee: $95.00

What kind of credit you need to get one: Good

Learn more about the Capital One Savor Cash Rewards Credit Card here.

1

Blue Cash Preferred Card from American Express

Best for: Most cash back overall

Cash-back rate: 1-6 percent

Annual fee: $0.00 for the first year; $95.00 after that

What kind of credit you need to get one: Good

Learn more about Blue Cash Preferred Card from American Express here.

And for more helpful information delivered to your inbox, sign up for our daily newsletter.

Source link

Continue Reading

Bad Credit

Possible Raises Series B and Moves Fully Remote | State

Published

on

SEATLLE, Oct. 20, 2020 /PRNewswire/ — Possible raises $11 million in new equity funding to expand the team and to provide additional products for its customers. Union Square Ventures led the round, with participation from existing investors Canvas Ventures, Unlock Venture Partners, Columbia Pacific Advisors, Union Bay Partners, Tom Williams, and FJ Labs. The company has also secured $80 million in new debt financing from Park Cities Advisors.

Furthermore, the company is now fully remote and recently onboarded software engineers from across the US and the globe. Possible is committed to distributed work and actively recruiting for a number of other remote roles.

Possible provides friendly access to capital and a simple way to build credit for people who otherwise would get a payday loan or get hit with a bank overdraft fee. The company uses real-time financial data, rather than a credit score, to qualify customers and provide funds instantly through its iTunes and Android apps. Unlike payday loans or overdraft fees, Possible loans are paid back in small installments over multiple pay periods to allow customers to catch their breath. By reporting on-time payments to the credit bureaus, Possible enables its customers to build credit history and eventually qualify for cheaper, longer term financial products. On average, customers with low credit scores see their scores increase by 70 points within 4 months.

Tony Huang, Possible’s CEO explains, “So many people who live paycheck to paycheck can’t afford to build credit history. We’re helping them do it for the first time while providing them with a friendlier and more affordable small-dollar loan.”

Since launching in June 2018, Possible’s given out loans to hundreds of thousands of customers, helping meet short-term cash needs while building credit history or establishing credit for the first time. These customers, often with bad credit or no credit history, are underserved by traditional banks. Possible fills that gap and provides financial access to those who need it most while giving them the means to climb their way out.

Gillian Munson, Partner at Union Square Ventures, explains the thesis behind their new investment, “Through tech innovation, data-driven insights, and a focus on the customer, Possible is well on its way to winning the hearts and minds of both consumers and regulators alike, and building a trusted brand that endures.”

A 2019 Experian study shows 34.8% of consumers are subprime and can’t access money when they need it. They pay $106 billion in punitive fees each year to the existing financial system for short-term credit products. These consumers are trapped in predatory debt cycles of payday loans and overdraft fees without the means to rebuild their credit or improve their financial health. While there has been a number of new tech-enabled products in this space, most lead to similar debt cycles and don’t address the harder issue of improving long-term financial health. That’s where Possible comes in.

Since the company is now fully remote, Possible is actively hiring talent across the globe. Tyler, Possible’s CTO, explains, “Being fully distributed allows us to access the talent pool of the entire world. Our success so far is a reflection of the quality of our people, and we believe hiring globally will allow us to find exceptional people to join us in achieving our mission.”

About Possible

Possible is a fintech company based in Seattle, Washington. The company provides a friendlier and easier way for customers to access capital while also building credit history and improving long-term financial health.

About Union Square Ventures

Union Square Ventures is a thesis-driven venture capital firm based in New York City. USV manages over $1 billion in capital across seven funds and focuses investments in portfolio companies with the potential to transform important markets.

About Park Cities Advisors LLC

Park Cities Advisors LLC (“PCA”) is a privately held, SEC-registered alternative credit manager based in Dallas, Texas. PCA is focused on private lending across the specialty finance and FinTech sectors and provides debt capital to companies across a variety of industries through asset-based financing transactions.

Source link

Continue Reading

Trending