Credit cards are plastic cards issued by banks that allow you to borrow money and repay it later at your convenience. Each has an assigned limit you must abide by in order to avoid incurring interest and fees; moreover, using one can help build credit – making loans and mortgages easier in the future.
Credit cards are issued by financial institutions
Credit cards have long been accepted as an easy, secure and practical payment alternative to cash and other forms of currency, while offering numerous other advantages, such as rewards programs and purchase protections. You must understand all parties involved when using your card – such as understanding what constitutes a network versus who extends credit directly. In the US, most major banks issue cards such as American Express, Chase, Bank of America Citi Barclays Capital One Discover; American Express stands out by operating both as payment network as well as card issuer.
Card issuers provide customers with credit limits, benefits and interest fees in addition to charging processing fees to merchants for transactions processed; additionally they incur interest expenses on balances that remain outstanding from month-to-month.
They are issued to people with poor credit histories
Credit cards can help those with poor credit rebuild their finances, but many end up incurring massive debt because they use them for emergencies or unexpected bills that arise. Furthermore, interest is charged on these balances making repayment even harder than anticipated. Consumers need to be wary when using credit cards; companies make billions each year from selling these products and it is crucial that consumers understand how these cards operate before using one. Many issuers offer “guaranteed approval credit cards” specifically targeted toward people with poor credit histories. These cards typically have lower credit requirements, may require deposits or other forms of security and should always be processed through official channels of a credit card company. Consumers should exercise caution if any website requests sensitive data for prequalification or eligibility testing purposes; always refer back to your official card company for this process.
They are issued to people who want to build credit
Credit cards can help build and enhance your credit history and scores, which can make life much easier if you lack one or have poor credit. Without one though, finding loans, cars and apartments may prove more challenging; but there are ways you can build it without one – like opening a secured card and making purchases regularly or asking someone with better credit to add you as an authorized user on their card can all help create positive credit history and scores.
If you are considering this route, carefully review your card issuer’s policies to see whether they report your account activity to Experian, TransUnion and Equifax – most reputable card issuers do. However, some do not and could put you at risk by lenders reviewing an outdated credit report which could reduce your score. Furthermore, keep your utilization rate as low as possible by only using part of your available credit.
