Credit cards can be a wonderful convenience, an extremely secure method of paying for goods and services, and even a way of obtaining cash-back or other benefits. It is unfortunate however, that credit card usage also holds many pitfalls for the unwary, or those prone to temptation; and it is always best to have a sound knowledge of not only how credit cards work, but how they can actually trap those who do not exercise sufficient caution. This means that it is more than worth taking some time to look at the different types of credit cards, which ones are most suited to different circumstances, and how to recognize the warning signs before signing up to any credit agreement.
Choosing the right card
There was once a time when all credit cards were essentially the same, with only cosmetic differences or small variances in the interest rates charged on outstanding balances. Essentially, account holders used their card in lieu of cash or check, and either cleared the balance in full when they received their statement, or were charged a stipulated rate of interest on any amount outstanding. Many of the credit cards available on the modern market are considerably more complex, designed to suit the specific financial circumstances of individuals, but – worryingly – sometimes dangerously inappropriate for those with alternative wants and needs. Choosing the right card for your personal situation is vital, and you may wish to consult credit card comparison sites rather than simply applying for the first card that catches your eye.
Credit card security
A new credit card received through the mail should – where relevant – immediately be signed on the signature strip on the reverse. The separately mailed PIN should be memorized and never written down, and kept with the card. The PIN should never be disclosed to anyone, even a member of staff of the card issuing authority. The card should always be carried securely in a billfold or purse and where it is lost or stolen. The card issuer must be notified immediately. It is a good idea to keep the contact number of the card issuer on your person and separate from the card at all times.
Credit card transactions
When using a credit card in a store or anywhere in person, always be sure that no one witnesses the input of your PIN to the electronic card reader. Check receipts at the time and keep them to validate against future statements. Be aware of any unusual looking attachments when using ATMs to obtain cash from a credit card as these can be card cloning devices. If using a credit card to make purchases via the telephone or Internet, be aware that your PIN will never be required, and be sure only to transact with known, reputable companies. Again, record details of the transaction for later statement verification.
Credit card statements
Statements on credit cards are usually issued monthly. When a statement is received, it should be opened and checked promptly, both for accuracy and for details of when payment is required to be made. Be aware that payment dates relate to when the funds are due to be received by the credit card issuer and be sure to allow appropriate time for a check to be received through the post or funds to be processed and transmitted electronically. Late payment fees can be hefty and lead to additional hidden interest rate charges.
Credit card payment difficulties
There are many people who find it convenient to use credit cards for large purchases or a succession of smaller purchases. Then while well aware of the interest they are being charged, they pay off the debt gradually. It is possible, however, to accrue credit card debt and pay only the minimum each month without realizing the extent of the problems which can potentially arise. If you do find yourself in a situation where making even the minimum payment is becoming problematic, it is vital that you contact your card issuer as soon as possible and advise them of the situation. Delaying will only exacerbate the problem; help and advice is available to anyone who finds themselves in such an unenviable situation.
Credit cards summary
While credit cards can be, and are a more than useful asset to a great many people, it is always important to know the precise terms and conditions of a card and the prescribed course of action in any given situation. Sensible and controlled usage can quickly assume a downward spiral if great care is not taken at all times. In order to get the most from credit cards in a safe and sensible fashion, follow all basic safety guidelines, use it sensibly, and think of whether its usage is appropriate before each and every large purchase. Finally, try to review the type of card you are using on an annual basis to determine whether an alternative card may be preferable, and more suited to any change in circumstances.