Factors to Consider before you Grab A Credit Card.

Recently I'd been approached by Banker who pre-approved my credit card before i applied. Then another banker offered me to apply too. It makes me wonder how am I qualified for the "plastic" and the myths, the goods and bads and the overall costs behind the picture of owning the bunch of "rewarding" Platinums, Golds and Visas. I hope you'll find this post helpful especially for first time credit card holders and for those who already have one or few but never knew the "creative charges" behind the bankers' desks. =)


(I'd also posted this post on my company's official blogspot in case you want to question if i violated digital publishing copyrights.)

Money is never enough. Is there anyone who disagrees?

With your salary alone, are you able to purchase all the things you need or want?

Hence the creation of the "Magic Plastic Card" with labels VISA, MASTERCARD or AMERICAN EXPRESS, etc.

The question here though: Is credit card a necessity, a luxury, or merely a tool?

How could you then decide if you should have one? And which one?

Let's have a brief overview of the Pros and Cons of owning a credit card, and then the ultimate list of credit card fees and charges you should be aware of.

Pros of Owning A Credit Card:

1. To increase your Purchasing Power.
2. Efficient Payment Solution especially for Online Purchases.
3. Less Cash to carry around.
4. Convenient Option for Frequent Travelers.
5. Arguable Discounts, Rebates, and Reward System.

Cons of Owning A Credit Card:

1. Unbudgetted purchasing freedom.
2. Credit card security issues.
3. The interest rates, applicable fees and hidden charges.

Ultimately, we have compiled for you a list of the charges and fees you might want to ask your bankers the next time you are about to swipe for "savings":

1. Universal default: rate hikes just because you inquire about car loans or open a new credit card account.
2. Teaser rates: low introductory rate that can hike up by 30%!
3. Minimum payment: you'll end up paying for way more than you are charged.
4. Change of Terms: read the fine print disclosure terms,

   “We reserve the right to change the terms (including the APRs) at any time for any reason.” A fixed rate is fixed until the bank gives you at least 15 days notice that it isn’t.

5. Cash advance/ convenience checks: Higher interest rates than your credit card rates!
   
6. Penalty interests and fees: can be from 7% to 27%! In addition to a Fee for exceeding credit limit!
   
7. On Time payment: the systematic statement mailing system that gives you less turnaround time to pay your bills on time if you rely on statements to remind you your bills.
   
8. Double cycle billing: finance charges calculated based on average daily balance. find out from your bankers or research further on how they calculate your Credit Scores.
   
9. Balance transfer switcheroo: multiple balance transfers hurt your Credit Scores!
   
10. Fees, fees and more fees!
    
11. Exchange rates for overseas credit card purchase.
12. Surcharge from Issuing Banks for overseas credit card purchase.
13. Currency exchange fees from VISA, MASTERCARD or AMERICAN EXPRESS for overseas credit card purchases.
14. National Banks' charges on usage of overseas ATM.

Beware, your Credit Score determines your Interest Rates.

Before we end, would like to wrap up this post with a friendly note,

Credit Card is a tool to ease purchasing transactions in today's modern world. It is not evil in itself and neither is it God. The costs to it can be phenomenal if uncontrolled spending behavior is practiced but if wisdom is practiced in purchasing, Credit Cards can be one of the best invention in modern history.

Links recommended for further study:

1. The Ultimate List of Credit Card Charges and Fees
2. Hidden Fees on Traveling Credit Card Charges
3. Do You Need Credit Cards?
4. How To Manage Your Credits?
5. How To Get Lower Credit Card Rates?
6. The Pros and Cons of Having A Credit Card
7. The Real Costs of Owning A Credit Card

Sources from:

1. http://www.consumersunion.org/pub/core_financial_services/004040.html
2. http://www.bankrate.com/brm/news/cc/20010416a.asp
3. http://moneyfor20s.about.com/od/creditcards/tp/needacreditcard.htm
4. http://moneyfor20s.about.com/od/yourcredit/tp/managecredit.htm
5. http://moneyfor20s.about.com/od/creditcards/ht/lowerccinterest.htm
6. http://www.solveyourproblem.com/debt-free/pros_cons_of_credit_cards.shtml
7. http://ownthedollar.com/2010/03/real-cost-owning-credit-card-year/