The Credit Card - A Most Valuable Tool For Building Credit

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Credit Cards
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The Credit Card - A Most Valuable Tool For
Building Credit
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Introduction
A credit card is a small plastic card issued to
the consumer by a financial institution such as a
bank or credit union. The card issuer creates a
revolving account with a line of credit to the
consumer. The cardholders can purchase goods and
services or receive a cash advance, until they
have reached their predetermined credit limit.
The merchant who accepts credit card payments
receives the money from the bank issuing the
card. The cardholder eventually repays the bank
through regular monthly payments. If the entire
balance is not paid in full, the issuer usually
charges interest on the unpaid portion. Credit
cards can be an extremely valuable tool if used
correctly. However, there are also risks for
those who lack self-discipline for the debt they
cannot repay. Although when used responsibly and
with the correct intentions, the card can provide
significant benefits.
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Convenance
The credit card is a flexible payment tool
accepted at over 30 million locations worldwide
as it has become a good alternative for cash. On
many occasions, situations arise where you need
more funds than what are immediately available.
Emergencies such as home or car repairs, medical
expenses, travel for a family crisis, are
attainable instantly with a card. Such credit
spending should be done with a short-term
intention with timely payments to avoid
accumulating debt.
Establish and Boost Credit History
Paying your bills in full and on time indicates
responsibility which helps to boost credit
rating. A good credit rating also helps in many
other situations, such as, obtaining a loan with
a low-interest rate. More than likely, your card
company will also approve a higher credit limit.
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Tracking Spending
As the credit card issuers provide detailed
monthly statements on purchases, they allow you
to keep track of your spending with ease. For
business owners, the summaries are a valuable
tool for tax return preparation, as they provide
information for allowable tax deductions. Rewards
and Benefits Many companies offer rewards and
cardholder benefits to their customers. Loyalty
programs have been designed to encourage
cardholders to use one specific card. As the card
is used, the cardholder accumulates airline
miles, hotel chain points, cash back points etc.
that a cardholder can redeem for products or
services. For those who use their cards
frequently, the rewards can be quite
substantial. In addition to loyalty program
rewards, cardholders also reap benefits that
include complimentary car rental insurance,
travel insurance or overseas health insurance.
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Borrowing Interest Free
Credit cards allow you to use the bank's money
interest free within a grace period. Therefore,
payment for purchases on the card are due at the
end of the pre-determined period. Paying your
balance in full each month enables you to receive
an interest-free loan month after month. In order
to entice new customers, card issuers frequently
create 0 interest rate promotional offers for
credit card purchases and cash advances. The only
limitation is for the credit loan to be fully
paid back at the end of set time period. If used
wisely, one can use the credit card 0 interest
loan to pay off higher interest rate debt. As
long as you have the self-discipline in
controlling spending, this type of financing can
be a valuable tool for money management and
budgeting.
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Consumer Protection
For mail-order purchases that are not received,
or turned out to be defective, the charge can be
disputed with the Credit Cards company. The
burden of proof lies with the sender therefore,
the consumer has limited financial liability.
Such consumer protection provided by the credit
card company is not available with most debit
cards or when paying cash.
Protection from Fraud
Carrying cash can be unsafe, as it can be stolen
or lost. The lost cash is rarely replaceable.
Instead, a misplaced or stolen credit card can
simply be inactivated by the card issuer and a
new one reissued. As for any fraudulent charges,
they can be challenged. Upon investigation, the
charges are usually forgiven or refunded.
Sourcehttp//bit.ly/2cT7Uqr
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• In addition, plastic credit comes with a
  responsibility of charges. Hence, you should
  ensure whether or not your current income can
  sustain that charges.

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