Credit Cards

Forbes  Nov 20  Comment 
Why Your Merchant Clients Should Offer Digital Gift Cards, All Year Long  Nov 20  Comment 
Credit card company has teamed up with Experian to offer 10.5 million customers regular and free access to their scores Barclaycard is offering its 10.5 million UK customers free access to their credit score in a move the company said will give...
Yahoo  Nov 19  Comment 
Shares of upstart credit card processor Square jumped almost 50% on Thursday after lackluster interest from investors in the company's initial public offering depressed its value.
Forbes  Nov 19  Comment 
Target reported Q3 2015 sales and earnings that were in line with optimistic expectations. Everything is going well. Target has regained its core customer through smart advertising and excellent values. The recovery from the credit card data...  Nov 19  Comment 
The mobile payment company has failed to impress investors ahead of a share sale that is a crucial test for Silicon Valley’s “unicorns” Mobile payment company Square slashed its share price on Wednesday night ahead of a sale that is casting...
Forbes  Nov 18  Comment 
Founded in 2009, Square has made it possible for the smallest of small businesses to accept credit card payments.
TechCrunch  Nov 18  Comment 
 A few days ago a $400 charge hit my credit card and Amazon notified me that my bitcoin computer was on its way. Essentially a Raspberry Pi connected with a custom bitcoin-mining ASIC and a heatsink, the computer is one of the most...
Clusterstock  Nov 18  Comment 
Consumers have been using their credit cards differently at some cash registers over the past month. Stores are increasingly reading the card's microchip rather than the magnetic strip. That's part of an industry-wide push for greater...
New York Times  Nov 16  Comment 
A battle between retailers and the banking industry over credit card technology adds fuel to a feud over what merchants pay for the processing of credit and debit transactions.


This is a personal finance article about Credit Cards. The industry article can be found here.

A credit card is a a plastic card with a magnetic strip, issued by a bank or business authorizing the holder to buy goods or services on credit.

Understanding Credit Cards

Must-Know Credit Card Terms

Before getting a credit card, it's important to understand the language used by lenders to describe one. Here are some must-know credit card terms that'll help you make sense of the fine print.

  • Annual Percentage Rate (APR) is the effective annual interest rate charged on the amount of credit used. Lenders are legally obliged to disclose the APR(s) charged by their respective credit cards.
    • Purchase APR applies to purchases made using the credit card.
    • Balance Transfer APR applies to transactions where an outstanding balance is transferred from one credit card to the other. This APR is usually higher than the Purchase APR.
    • Cash Advance APR applies to transactions where cash is borrowed using the credit card. This APR is usually higher than the Purchase APR.
    • Introductory APR is the teaser APR applied to transactions for a limited period of time initially. This APR is usually lower than the Purchase APR.
    • Penalty APR is the increased APR applied to transactions if a card holder makes a late payment or pays less than the minimum payment specified in the card holder agreement. This APR is usually higher than the Purchase APR.
    • Tiered APRs are the increasing APRs applied to successive levels of an outstanding balance.
  • Card Holder Agreement is the statement specifying the terms and conditions associated with a particular credit card. Lenders are legally obliged to provide prospective card holders with a card holder agreement that spells out, among other things, the card's APR(s), terms of use, service charges, payment terms and the card holder's billing rights. However, a lender may change the terms and conditions in a card holder agreement at any time, provided it gives sufficient advance notice to the card holder.
  • Grace Period refers to the period of time after a statement date when the outstanding balance on a credit card must be cleared to avoid incurring a finance charge. For most credit cards, the grace period is between 20 and 30 days, although card holders that carry an outstanding balance forward are usually given no grace period. In addition, there is generally no grace period given for balance transfers and cash advances.

Common Credit Card Fees

Using a credit card without understanding the associated charges can often turn into an expensive affair. Here are some of the common credit card fees that lenders charge their card holders.

  • Annual Fee is the yearly membership fee charged for the right to carry and use a lender's credit card. Except in the case of secured credit cards, most lenders do not charge card holders an annual fee.
  • Application Fee is the fee charged by a lender when you submit a credit card application for processing. Although this fee may be charged for processing any credit card application, it is most commonly seen in applications for secured credit cards.
  • Balance Transfer Fee is the fee charged by a lender when an outstanding balance is transferred from one credit card to the other.
  • Finance Charge is the fee charged by a lender when an outstanding balance isn't cleared within the grace period. It depends on the card's APR(s), outstanding balance and finance charge calculation method.

Getting a Credit Card

Learning about Credit Cards

Before applying for a new credit card, invest some time in learning more about them. Understanding the terminology associated with credit cards will help in making a more informed decision about which card to get. The Federal Reserve and Federal Trade Commission have websites here and here that introduce consumers to the many terms used by credit card companies, some of which include annual percentage rates (APR), annual fees, transaction costs, liability limits and incentive schemes.

Shopping for a Credit Card

If there's a credit union nearby, consider researching their options since they tend to offer better terms than traditional banks. There are also a few websites, like Credit Card Hub,, Index Credit Cards, Credit Card Wisdom,,, NewHorizon.Org and (and in Canada, that are Advertising Affiliates who are paid a commission by the relevant credit card company if you sign up for card through their site. There are also sites such as who share the commission with you to sign up through their site. Last, but not least, and lets consumers compare all sorts of financial products, including credit cards. Another thing to consider for the best credit card offer is from that enables consumers to search and compare credit cards, review the best credit card offers, and apply online.

Types of Credit Cards

  • Standard Cards are the most common type of credit cards. They allow card holders to make credit purchases up to a certain limit. Charges are levied if a card holder, among other things, exceeds the credit limit, fails to clear an outstanding balance within the grace period, makes a late payment or pays less than the minimum payment specified in the card holder agreement.
    • Balance Transfer Credit Cards
    • Low Interest Credit Cards
  • Premium Cards offer more benefits as compared to standard cards. Some of these benefits include higher credit limits and extra features like emergency services, product warranties and travel insurance. However, premium cards tend to levy higher charges as well.
    • Gold Credit Cards
    • Platinum Credit Cards
    • Titanium Credit Cards
  • Reward Cards offer incentives for engaging in specific credit transactions. These incentives range from cash back rewards and purchase points to airline miles and gas rebates. However, lenders generally require that prospective card holders have higher credit scores.
    • General Rewards Credit Cards
    • Airline Rewards Credit Cards
    • Automobile Rewards Credit Cards
    • Cash Back Credit Cards
    • Gasoline Rewards Credit Cards
    • Home Improvement Credit Cards
    • Hotel Rewards Credit Cards
    • Retail Rewards Credit Cards
    • Travel Rewards Credit Cards
  • Cards for Bad Credit are targeted at individuals with limited or tarnished credit histories. As a result, they tend to have lower credit limits and more restrictions as compared to standard credit cards. However, they also give card holders the opportunity to establish, extend or rebuild their respective credit histories.
    • Prepaid Credit Cards
    • Secured Credit Cards
  • Specialty Cards are targeted at individuals with unique credit requirements, like businessmen and students.
    • Business Credit Cards
    • Student Credit Cards

Using Credit Cards

Canceling a Credit Card

Canceling a credit card usually has a negative effect on your credit score because:

  • it decreases your utilization ratio. Since your credit limit drops after cancellation, what you owe increases compared to your credit limit, and
  • it decreases the average age of your credit, if the card that you cancelled is older than the average age of your credit.

However, canceling a credit card may be a sound option for those who want to:

  • simplify their life, and
  • reduce the risk of identity theft (risk of theft is higher for unused cards since you don't pay attention to them).

In these circumstances, canceling a card may be worth it, especially if:

  • you still have a healthy credit limit (at least 3x your average balance),
  • this card was just recently opened (in this case, it might even increase the average age of your credit).
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