Category: Credit Cards

Everyone who uses a credit card agrees and swears by the convenience they provide. These plastic cards have made life so much easier. You do not have to worry about carrying cash and forgetting to carry enough cash. No worries about your cash getting stolen as well. But have you ever wondered about how it must feel to be on the other side of this convenience? I am speaking about the merchants who accept your credit cards when you pay for your purchases done from their shops.

Does it cost to accept credit cards?

We, as consumers of credit cards have no charges applied for each individual use of the credit card when we shop. We have to pay an annual fee towards maintenance but not for every transaction that is performed against the credit card. But merchants are supposed to pay a fee each time that they use your credit card to pay for the purchases.

This cost is called as the credit card discount rate and is denoted as a percentage. This includes a certain fixed percentage for each dollar that is processed during transactions and also an additional fixed transaction fee.

Varying credit card discount rate for different transactions

The credit card discount rate can vary widely with different kinds of transactions done to process the payment from the credit card.

For example there are different ways in which a payment could be processed by using a credit card:

1) Swiping it through the terminal or credit card reader;

2) Manual keying in of credit card number with billing address and lastly;

3) Manual keying of credit card number without billing address. Here authorization key is provided manually by forced authorization.

Who receives the credit card discount fees?

The credit card discount fees that are charged to the merchant are divided amongst the processor of the transaction, the bank to which the transaction is processed, the merchant service provider and the card associations involved in the process. The actual or effective credit card discount rate that is charged to the merchant varies with each transaction according to type of transaction and also according to downgrades, assessments and per item charges.

Credit card discount rate is applied to the merchants for providing consumers with a convenience of conducting cashless purchases.

Credit cards are an indispensable financial tool for most of us. Many of us cannot even imagine how the world managed to get its shopping and other financial needs accomplished before there were credit cards.

Credit cards are no doubt a matter of great convenience, but it is the interest rates on credit cards that inconvenience us. There are different brands and types of credit cards that vary widely from 0% interest rates to extremely high rates.

How are interest rates on credit cards computed?

The usual system of charging interest on credit cards is pretty simple. The bank or the credit card company assigns a particular grace period to every credit card consumer. This grace period denotes the period of time that is available to the credit card user to pay the credit card bills for that month in total.

If the user fails to pay any or all of the credit card bill amount within the grace period, the company then applies interest rates on credit cards according to the terms and conditions that were mentioned in the credit application.

An interesting point to note about the interest rates on credit cards is that it could be either fixed or variable.

Fixed interest rates on credit cards

Fixed interest rates on credit cards remain the same and do not fluctuate often once the credit card has been issued. This type of interest rates on credit cards is most convenient for credit card users because there is no element of surprise involved. They know very well what to expect and how much interest rates the balance that they carry on their cards will attract.

Variable interest rates on credit cards

Variable means changing and this type of interest rates keep changing over time, generally in response to a market index. The reason for the changes being that variable interest rates on credit cards are actually based on another kind of interest known as the prime rate. Variable interest rates are in reality prime rate plus another amount specified in the terms.

What is prime rate?

Prime rate is the rate of interest that is charged by banks when they extend credit to their most credit worthy consumers. Prime rate can also be understood as the best deal on interest rates that a credit worthy individual can manage to get.

Understanding everything about interest rates on credit cards helps you choose a credit card that will be more suited to your needs and economically more viable.

Savvy consumers in general have the tendency to compare, review and analyze the pros and cons of any product before they purchase. Nowadays, the craze for reviews and consumer opinions have sky rocketed so high that one out of every fifty websites is a review site.

Credit cards are also subject to these general consumer trends and most of the credit savvy consumers like to check the credit card ratings before they can make a decision about applying for a new credit card.

What are credit card ratings?

Credit card ratings are nothing but ratings or points assigned to credit cards by the people who review the pros and cons of the cards. It goes without saying that credit card ratings are very important in deciding the popularity or notoriety of a credit card.

Credit card consumers are now becoming more and more aware of the significance of credit card ratings and this awareness has directly fuelled the mushrooming of numerous credit review sites all over the internet.

Criteria used for credit card ratings

There are many different criteria that are used by credit card review websites. Some of the credit card ratings are based on APR rates of interest. Those with the highest rates of interest get low credit card ratings while the ones with the lowest APR or 0% APR get the best ratings.

Again there is another criterion that is popularly used to rate credit cards: “The rewards feature”. More the number of rewards that the credit card provides to the user, the better is the rating given for that card by the credit card reviewer.

Similarly, there is yet another criterion — approval rates. Some credit cards are very difficult to get approval for, while others are relatively easier. Obviously the ones with easier approval or instant approval get higher ratings and vice versa.

Credit card ratings could also be based on the category / group of consumers that the credit cards are targeted to. Like there could be ratings for student credit cards, business credit cards, bad credit credit cards, no credit credit cards, and other similar classifications.

Whatever the standards, there is one important thing that every consumer must be aware of before depending on these credit card ratings for credit card applications. Not all the credit card ratings can be relied upon. There are certain sites that rate the cards solely upon the commission that they get from making a successful sale. The reviews offered by such sites will no doubt be biased and less targeted to benefit the consumer.

Credit card ratings are an excellent way to get a quick and clear idea about top-performing credit cards in the category that you are searching for.

Secured credit cards are a boon to credit card holders in many ways. If you already have a good credit score and are eligible to get credit cards issued as you wish, then you have nothing to worry. But not everyone enjoys a good credit score.

There are instances where the credit score is too poor to be eligible for a regular credit card. Also sometimes credit card users need to build their credit scores quickly in order to get a regular credit card issued. In all these situations, secured credit cards can double up as a very handy tool.

How do secured credit cards work?

Well, secured credit cards work just like any other secured loan. For example, when you apply for a loan from a bank, they always scrutinize your application to see what kind of asset you could provide as collateral or security. The worth of the collateral or security that you can provide will often determine the amount of loan that the bank will ultimately extend to you. This is just a strategy adopted by the bank to minimize the risk on the loan amount. In the event that you fail to pay back the loan amount and its interest, the bank always has your collateral to sell and can still get the money back.

Secured credit cards also work in a similar manner. When a bank or credit card company does not find your credit score to be as reliable as they would like it to be, they prefer minimizing the risk on the credit by asking for a security (collateral). This security is usually in the form of a bank account with a fixed deposit. It goes without saying that the amount of money in the fixed deposit is directly going to influence the credit limit provided by the secured credit cards issued against it.

Facts to know before applying for secured credit cards

There are certain criteria to be met before your application for secured credit cards gets approved. If you have filed for bankruptcy in the recent past, you will not be eligible for getting a secure credit card.

Just because you have poor credit score and there are no other options for you except using secured credit cards does not mean that you should agree to pay sky high interest rates for using them. There are many options within the category of secure cards as well, and you just need to compare them in detail to get a good deal.

The best use of secured credit cards is as tools to build your credit score. Making timely payments on the credit card bills and not using more than 20% of the credit limit available on the cards is the best way to get maximum advantage from them.

As the proverb goes, there is a silver lining to every cloud. Even if you are restricted to using secured credit cards because of your poor credit score, you can always look at the brighter side and use them to build a good credit score by making timely payments.

College students are over-eager to have credit cards, not just as a funding source but as an alternative to cash. Unfortunately, a lot of college students cannot fall back on a reliable source of income, but having no income does not make them stop short of having a million and one requirements.

You may want to check out our student credit card offers as well.

Do banks consider students as credit worthy?

Banks and credit card companies do not want to know about your needs, they only want to know if you are worth risking their money on. And no one in his/her proper financial senses would consider a student with no source of income to repay the credit as worthy of risking their money on, right? Wrong! If that would be the case, no bank would ever come up with credit cards especially meant for students. There are lots of student-focused credit cards and almost all of the popular credit card companies and major banks have provisions for issuing credit cards to students. The terms may be different and the credit limits may be lower than what one would like, but the possibility still exists.

What are the best credit cards to have for students?

If you are a student and wondering what are the best credit cards to have, then you need to know that there are many choices for you. You can choose from unsecured, prepaid, and secured credit cards. But before you can choose one of them, you need to know a bit about each one. Only then can you get an informed answer to your doubt about what are the best credit cards to have?

Secured credit cards

A secured credit card offers you credit against some kind of security. If your parent/guardian has a bank account, then you need not worry. The bank where your parent or guardian has an account can issue a secured credit card to you against the security of the money/fixed deposit that your parent or guardian has maintained here.

Unsecured credit cards

Banks and major credit card associations are ready to provide unsecured credit cards to students as well. These credit cards typically have limited or lower credit limits when compared to regular credit cards. Some of the most popular cards in this category also pamper the students with lots of rewards and bonuses. For example, if the bills are paid on time some card companies offer a 25% reward. Some companies have entirely taken off the annual membership charges and some others provide 1% to 5% cash back on all purchases.

Prepaid credit cards

As is obvious from the name, these credit cards only offer a credit limit that matches the amount of cash that you have prepaid / loaded on the card. So basically it works like a prepaid phone card, and you get to spend only as much money as you have prepaid to the credit card company.

Though it does not offer any credit advantage, this card is very beneficial as an alternative source of cash. Furthermore, you do not run the risk of over-spending or incurring unwanted fees.

You might be already aware that 0 introductory APR credit card denotes a credit card that charges 0 % interest rates/APR. It is hard for credit card consumers to not know about these cards because there is so much of effort initiated to market, promote, and sell these cards by banks and credit card companies.

At the outset, 0 % interest does seem to be a very exciting offer, but if not carefully handled, the 0 introductory APR credit card may turn out to be much costlier than you bargained for.

Click here to compare 0 introductory APR credit card offers

How do banks make money with 0 introductory APR credit card?

How can banks make any profit from selling a 0 introductory APR credit card, and if they are not making any profit out of the sales, why are they so enthusiastic about promoting these cards to every customer with a good credit score? Though it seems at the outset that there is no profit to be made on a 0 % APR, the actual fact is different.

Banks make a lot of profit on these 0 % APR cards and there are various ways in which they make their margin.

Profit from new purchases

Though the marketing and promotional activities make it look like the 0 introductory APR credit card charges 0% interest on all kinds of transactions on the credit card, the real truth is usually hidden behind a tiny asterisk.

When you check the footnote that explains more about the asterisk, you will know that the 0% interest applies ONLY to certain transactions. In all probability, the 0 % interest rate is applicable only for balance transfers and this offer, too, is restricted to new customers only.

If you overlook the asterisk and terms and conditions by mistake and then go ahead and use the card for new purchases, the bank immediately makes a profit by charging higher APR on this transaction. It may be only after you check the bill next month that you bother to get more info about the terms and conditions and by that time you have already made 1 or more purchases.

Profit from delayed payments

Another important condition that applies to the 0 % interest rates on a 0 introductory APR credit card is the duration or validity of the offer. Usually the 0 % APR interest rates offers are commonly valid only for 12- 18 months. If you forget about the expiry date of the offer and carry the balance beyond this date, all of the remaining balance will be charged higher rates of interest. This is another way for banks to make a profit on the 0 introductory APR credit card.

A 0 introductory APR credit card is the best kind of offer that any credit card user can ever get. What more could you ask for than enjoying credit for free? But it is your responsibility to make sure that you are totally informed about the terms and conditions and fine print before you sign up.

You might have come across the term low balance credit card and wondered what they meant. Well, low balance credit card is often used to describe credit cards that apply low rates of interest on balance transfers.

How does a low balance credit card work?

These credit cards are designed to assist with consolidation of the debt accrued on credit cards and to help consumers cut back costs by saving on the interest difference by transferring the balance from the higher interest card to the lower interest one.

As is obvious, a low balance credit card will carry interest rates that are quite low when compared to the regular rates and this is what makes these kinds of cards quite popular with the masses. Majority of the credit card companies prefer bringing these low levels to ground levels by offering 0% interest on balance transfers.  Most of the credit card users would do anything to get one of these cards.

Is a low balance credit card safe to use?

Well, the answer to this query depends on the way you decide to make use of the card. It is safe to use a low balance credit card, as long as you do not make any new purchases with this card. You must understand that the low or 0% rate of interest that come as part of the offer are applicable only to the balance transfer activity and not for any other kind of transactions done with that particular card.

Also you must make sure of the validity of the offer and the exact duration for which the low rates of interest will be applied. If you have a balance that is quite large and impossible to pay off in full before the expiration of the low rate offer, do not opt for such cards. Any balance that extends beyond the offer period will be calculated according to regular rates of interest (which are quite high and sometimes maybe higher than your current card).

What’s the final verdict on a low balance credit card?

A low balance credit card can come across as a boon if you are trying to pay off your credit debt and clear out all those pending balances. But you have to be sure that you can complete the payments before the expiry date of the low interest rate offer, or else your finances could end in a soup.

If you can manage your finances responsibly, then there is nothing better than a low balance credit card.

Most of the credit card companies ask for credit score or credit history before they consider your application for a new credit card. That is alright, but what will the first time credit card applicant do? How is he going to convince the credit companies to issue him credit cards for no credit? Well, it does seem a bit tough at the outset, but there has to be a solution to this problem because every credit card owner has to apply for the first time at some point.

Check offers advertising credit cards for no credit                        

Credit card companies commonly advertise special offers promoting credit cards for no credit. Typically, this kind of promotion is aimed at the section of the population that is known to have no credit, but is desperately in need of a credit card. The best examples of this kind are students and the younger adults who have not yet established any sort of credit reputation till date.

Remember you do not have to pay any fees to get a credit card and there is absolutely no need to panic about your inability to get credit cards for no credit.

Low limit credit cards for no credit

If you have not yet received any of the offers mentioned above, then the best solution for you can be low limit credit cards for no credit. These are credit card issued by major credit card companies but have a very low amount of credit limit. The usual limit is between $150 and $300 as a starting point.

The tip is to use these low limit credit cards for your everyday purchases. Then make it a point to pay off the outstanding dues at the earliest without holding any balance. Doing this for some time will automatically make you eligible for higher credit limits. When you manage to get between $1000-$1500 as your credit limit other credit card companies will be willing to issue credit cards to you. But remember that banks prefer credit card users who have a credit history of at least six months before they can trust you, so stick with the low limit cards until then and shrewdly use them to get regular high limit credit cards issued.

It may be a bit difficult to get credit cards for no credit, but it is not entirely impossible. You just have to know where to look and what tricks to apply. Nowadays, credit card companies are bringing out various interesting offers for people with no credit as well.