What is a credit card is one of the most asked question, and this article intends to explain to you exact what is a credit card all about. To understand a credit card , you need to know that it is just one of many forms of credit which comes in many different conformations and proportions which includes mortgages, loans, overdrafts and credit cards.
Now that you are knowledgeable with what credit is, lets have a look at the different options you have to access credit lines.
Splendidly put, credit solely means any contract where a pre-agreement is put in place for you to buy services or goods now but that agreement affords you the luxury of paying later for those goods or services. This article is intently put together for your introduction to the many different types and options of credit at your disposal readily available for when you need a helping hand financially.
We mean to help you make sense of some of the jargon you’ll come across, as we came to learn quickly how ignorance can cost one a lifetime’s savings when all it required was for some one to write about what a credit card is all about.
What Is A Credit Card
A credit card is provided by a credit card provider in many cases it’s usually your credit union , bank or a building society, and these credit cards have a credit ceiling allocated to each account holder, designed to allow the credit card bearer to pay for things in shops or online even when he has no money.
You can also use credit cards for balance transfers and taking out cash which is commonly known as cash advance or cash withdrawal from any auto teller Machines where a Master Card or Visa symbol is displayed.
The second anyone apply for a credit card, means you apply to take on loan money from the card issuer, who like i said earlier is usually a bank. Before any line of credit is approved by a panel of risk assessment managers, part of your application process gives the credit card issuer permission for them to look into your spending habits over time. This step though its fairly quick in practice, it is the most crucial assessment level where so many factors in your financial activities play a role.
The lender will look at what is contained in your credit history on a credit report and your current obligation or commitment pipeline before your credit card application is accepted– and if you have a low credit score recorded on your credit report you could be refused credit, or perhaps given a less attractive deal.
A credit report is a summarized synopsis of your economic activity and commitment over your life or selected time frame which forms a centerpiece of your lender’s decision to allow you have access to a credit card or Mortgage.
What Is A Credit Score
A credit score is every lender’s best friend, it is a detailed numerical expression predominantly put together based on a level analysis of an individual ‘s credit files. Credit score represents the creditworthiness of the person and lenders, such as banks and credit card companies, use credit scores to price out or determine your interest rate while evaluating the potential risk posed by lending money to consumers and to mitigate losses due to bad debt.
Now that you are in the know of what a credit card is ( in essence a type of credit line or loan), where the credit card bearer has an authorized amount of money to spend on that particular card, borrowed from a lender, such as a credit union, building society or a bank.
If you do not clear your balance at the end of each month, interest is then added to the amount you spend.
To accept a credit card payment used to be a tedious job back in the day, as the process of capturing the payment and details used to be done manually. Today there are four main ways to accept a credit card:
a -Accept A Credit Card On The Phone
b -Accept A Credit Card Online
c -Accept A Credit Card With A Virtual Terminal
As a rule of thumb, a good credit score that falls anywhere between 700 and 850 is considered to be an excellent place to be for anyone hoping to get a good deal on a credit card or Auto loan. How ever if your Credit score falls below the 700 mark, don’t panic! It is possible to still get your Credit card approved save for the interest rate.
You would have to pay a little more than what a good credit score bearer would when servicing your loan.
While the industry has universal metrics for measuring and assessing risk, banks themselves their own tools that can be deployed to interpret data differently. This means there are lots of different credit scores that lenders use when trying to decide whether to grant you a loan
Because competition is rife one lender’s “good” score may fall into another lender’s “fair” credit category. Fortunately, there are expansive rules of thumb that can help someone figure out whether their credit is good or not.