Credit cards are everywhere, a part of many of our lives. And yet so many of us don’t know the true story on what they are, how they work and how best we can use them. With that in mind, we decided to do a credit card FAQ.
The Concept Of Credit Cards
Instead of using cash from your bank to pay for items, you can use a credit card to borrow money from the credit card business to pay for what you want.
The credit card company pay the store or service provider on your behalf. You must then repay the credit card company.
You won’t have to pay any interest if you pay them back all you spent in the previous month. Just ensure you do this by the due date on your statement. However, if you can’t afford to pay it back or prefer to pay it off over time, providers will charge you interest. What’s more, the items you originally purchased will become more expensive over time.
The limit will lower too on your card if you fail to meet terms and conditions.
Credit Card FAQ – Types Of Cards
You can use credit cards both in-store and online shopping, but there are also other sorts of cards available.
Depending on how you intend to utilise it, each offers its own set of advantages:
Credit cards with cashback or rewards. Earn money or benefits (such as Airmiles) when you spend.
When you use a travel credit card, you might obtain better rates when you spend money abroad.
Balance transfer credit cards. Pay a modest charge to transfer debt from one credit card to another, but pay no interest for a set length of time.
Money transfer credit cards. You can transfer money from your credit card to your bank account for a fee.
0% of people use credit cards to make purchases. – pay no interest for a predetermined period of time.
Credit cards for credit building. If you have a low credit score, you can increase it by using credit cards. Keep in mind that credit cards have hefty interest rates, so make sure you pay them off in full each month.
Application Process
When you apply for a credit card, you will be asked a number of questions. You may believe they’re being a little personal, but they need to evaluate your situation.
Most businesses will ask the same questions, albeit the lender’s decision to lend you money will be different.
Credit card issuers will often ask for your name, last three or five addresses, information about your employment, and how much money you have left over each month after paying your portion of the mortgage/rent and childcare costs.
The credit card firm will then review your credit report to see if you pay on time, stay within your credit limits, and don’t seek for credit too frequently.
Credit Card FAQ – Limits
Each lender evaluates your profile (based on your credit record and the information you provide in your application) to determine the maximum amount you can borrow.
You can request a credit limit increase every six months, but this may have an impact on your creditworthiness. You can also ask to have your credit limit reduced. Your credit limit may be increased or decreased by the lender, who will notify you in writing. You have the option to deny the increase, but you won’t be able to stop them from lowering your credit limit. The average credit card limit in the UK is between £3,000 to £4,000.
Popular Providers
There are a variety of credit cards available to suit your needs, but there are three main categories of credit cards.
The three major payment processing businesses are Visa, Mastercard, and American Express.
American Express (or Amex) is a company that issues credit cards and also processes payments. Visa and Mastercard do not issue their own cards; instead, a bank or credit card firm issues them.
Visa and Mastercard are accepted by more retailers and service providers than American Express.
