Credit Card System

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The Best Credit Card Deals
It is not always feasible to carry a fat wallet when you go on a shopping spree, or are traveling to far flung places. They as it is are a nuisance and at times can be a source of safety scare as well. The concept of plastic money came up only to address issues such as these, I reckon.

The financial market in UK is flooded with lucrative deals on credit cards by almost all the major fin... Read credit cards article



Right Time To Use A Credit Card
If you need to use a credit card, pay the balance in full every month. Don't pay just the minimum payments. If you pay off the balance before the grace periods ends, you won't earn any interest but you will still enjoy the benefits of financing and dividing purchases in multiple installments.

Credit Card for Tracking

Use your credit card if you need a record for tax purposes... Read credit cards article



Credit Card System
The concept of credit is as old as Man himself. Since the dawn of civilization, people have borrowed money in order to purchase goods or hire services for which they were not able to pay at that moment. In return, they promised to repay their debt in the future and pay the lending agent a fee for his service. In modern day language that means that a financial institution grants a loan to its client and expects that loan to be repaid with interest within a specified period of time. Until the 1970s, those loans were made for a specific purpose, like buying or building a house (where the credit is called a mortgage) or financing the purchase of a new car. The object for the loan was then taken as a collateral to ensure that the lending institution got back its money.

The credit card industry began to develop in the late 1970s, changing completely the way banks grant credit by making it available to huge numbers of people. No collateral is required when applying for a credit card. Instead, the banks look at the trustworthiness of its clients by checking their past behavior when borrowing money, which is called their credit history. This and the amount of fixed income the client has determines the credit line, the amount of money the client can borrow from his bank on a monthly basis through the use of his credit card.

Today it is not only banks that extend credit to large numbers of qualifying individuals. Many retail institutions like department store chains offer their customers their own credit cards in order to turn them into loyal clients. Nowadays consumers can buy nearly everything from groceries to clothes or book a holiday by using what has come to be called plastic money.

In consumer societies, for example the United States or Japan, buying goods on credit and paying for them later has become the norm. In fact, the granting of credit by financial institutions to individuals through the use of credit cards has become the engine for the whole economy. Societies that operate exclusively on a cash basis tend to be more conservative and its members tend to think more carefully before spending their money. However, the lending of money generates more economic activities and therefore creates more jobs and more wealth. This has to be based on the premise that the financial institutions grant their credit wisely to responsible consumers.

Banks and financial institutions, in general, are not government agencies or charities, but are companies that are in the business of making profits for themselves. They do that through various means such as the annual fee they charge the credit card holder, even if he never uses the card, the fees the merchants have to pay to the bank for the privilege of being able to accept credit cards in their stores, thus attracting more clients and the interest they charge the credit card holder for the credit itself.

But there is a risk as well that the financial institution runs when issuing credit cards to its clients. It may lose money when people default on their account, i.e. they do not repay all the money they have spent using their card. Or the bank may lose money when its customers do not use this particular financial instrument enough so that the profits generated are not sufficient to cover the cost of the operation of the whole credit card system.

Michael Russell

Your Independent guide to Credit Cards

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Student Credit Card

For some parents, the idea of entrusting their adult child with a credit card while they are off working toward their university degree sounds like pure madness. Certainly, there must be a better way to make sure that your child's needs are met while they are away from you, right? Well, if you are worried about your ace student running up debt while they are in school, then that is a valid concern. However, what better time is there to learn how to manage one's personal finances than when going to school? There is wisdom in obtaining a student credit card; you just need to see the big picture and establish some ground rules before your student applies for one.

Many parents cringe when they send their adult children off to college. If your child has a tendency to be irresponsible, then college can either fuel that irresponsibility or teach your child how to grow up in a hurry. Unfortunately, it isn't always clear how your child will respond to being "free" until you drop them off at their dorm and head back home.

A student credit card could possibly be dangerous for your student if they do not fully understand the responsibility of managing their personal finances. So, this is where you come in -- before your child applies for a student credit card you must discuss several things first including:

Will the card be in your child's name only or will you be co-signatory? With the former option, you will not have any control over your student's spending, therefore it is imperative that you tell him how managing his credit now can impact him after he leaves school. That is, any credit problems that come up due to his irresponsibility can keep him from buying a car, a home, even securing a job once he enters the "real world."

If you are co-signatory on the card then you can keep a lid on his spending and check his statement out each month. With the latter option he will not be able to build up credit on his own, thus a student credit card issued only in the student's name will help him establish a personal credit history.

Will the card be used for every day purchases, emergencies, or something in between? You probably don't want to encourage your daughter to fund dorm-wide Friday night pizza parties with her student credit card, but you may think it a great idea to have the card on hand for book purchases and for emergencies. A student credit card can help you come tax time too as all of the deductible expenses related to attending university are listed on each statement. Moreover, if your daughter has an emergency she can use the card to pay for automotive towing, a trip to the optician to replace broken eyeglasses, or to catch a bus ride home for the Thanksgiving break. No need to worry about paying for the expense of wiring money; a student credit card has your daughter covered!

If your son or daughter shows plenty of responsibility with their card it can only help them later on in life. Yes, there is a potential debt issue involved, but if you are paying tens of thousands of dollars per year for tuition, then that expense pales in comparison. Most student credit cards offer only a small credit line starting at $500 on up, so the concern about taking on massive credit card debt is overblown. In addition, you can always tell the credit card company that you want to keep the credit limit down - just because they may offer a $10,000 credit line does not mean you must take it.

Ultimately, a student credit card can be a wise choice for university families. With a student credit card there is no need to worry about your child carrying around a wad of cash or wondering how they will handle an emergency when you are not around. A student credit card can offer the security and peace of mind that everyone needs when your adult child is hundreds of miles away from home and unable to turn to Mom and Dad for immediate help.

(c) 2006; You may republish this article to your website with the following author resource information and link left in place.

Matthew C. Keegan invites you to learn more about personal finances via his Credit Card Venue website.




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