There are a number of advantages of credit cards to consumers. Many transactions, such as renting a car or shopping online, require the use of a credit card. The Federal Reserve Board advises you to shop around to find the best credit cards to serve the purposes for which they will be most used. You should look for the advantages that will benefit you and ignore those benefits that do not fit in with your lifestyles or credit card usage patterns.
Cash Advance
A credit card often offers a cash advance feature that operates as a line of credit that can be used in times of need. Cash advances often have different interest rates and repayment schedules, so you should pay attention to the rules as they apply. Cash is usually available through an ATM with a personal identification number. Some credit card companies send you blank checks that can be filled out and cashed. Fees often apply to cash advances in addition to interest charges. Credit limits vary and can range from a percentage of the available credit to daily or weekly minimums.
Grace Period
Credit cards can be advantageous if you pay off your cards during the grace period allowed on most accounts. The grace period allows you to borrow money for free. When balances are paid off within the grace period, no finance charges apply. When balances are carried over from a previous month, however, there may not be a grace period on new purchases.
Credit Scores
Credit card companies report the payment history of their clients to the major credit reporting agencies in the United States. Credit card payments, as well as late payments and defaults, are usually reported monthly, which can drastically affect your credit score. If you have a poor credit score, you can quickly repair your ratings by paying credit card bills on time. Secured credit cards, which are issued with a deposit on which you can draw, can serve to create a credit report if you do not have enough credit history.
Incentives
In a competitive financial market, many credit card companies offer incentives for you to apply for credit and to use your cards regularly. These incentives can be especially useful when you use your plastic for purchases you would make anyway. Incentives might include rebates on certain purchases, additional warranties on large purchases and frequent flier miles. For a fee, many companies offer insurance that will pay the balance of the credit account in the event of death or disability. Additionally, by law, you are not responsible for charges more than $50 if your cards have been stolen.
Member Comments