MyCardBlog

In the following days, I will post some basic knowledge about credit card. Most of the materials are from HSBC. They really have done a good job on introducing basics about credit card. I hope this will be helpful for you all.

Credit Cards
The money you spend when you use a credit card isn’t really yours — you’re actually borrowing it from the bank or other financial institution that issues the credit card, in an arrangement called revolving credit. (Revolving credit-A credit arrangement that lets you borrow up to a certain credit limit for a defined period of time. The balance may fluctuate from zero up to the maximum amount.) You have access to a fixed amount of money, called your credit limit. (Credit limit-The maximum amount you can borrow in a revolving credit arrangement.) Once you repay any of the money you have spent, you can borrow that amount all over again.
What you borrow, or what you spend, is called principal. (Principal-For a mortgage or other loan, the amount you borrow. When investing, principal is the amount of your initial investment. If you buy a bond, the principal is the amount you invest and the face value of the bond.) For the privilege of using the principal, you pay the credit card issuer a finance charge, (Finance charge-The total dollar amount your loan will cost you, including interest, points and fees.) which is the interest (Interest-In a credit arrangement, the amount, figured as a percentage of your unpaid balance, you pay the lender. With a savings account, the amount a bank pays you for keeping your money on deposit. Interest is usually figured as a percentage of your total deposit. Simple interest is calculated only on the principal. Compound interest is calculated on the principal and any earnings or interest that accumulates.) that accumulates on any unpaid balance. For example, if you have a balance of $600 on a card with an annual interest rate of 18%, your monthly finance charge will be $9. It’s calculated by multiplying a month’s worth of interest — 1.5% — times the balance.

Every credit card company has to disclose the interest rate it charges on the balance you carry, and different cards charge different rates so it’s worth shopping around. Some list their monthly or daily interest rates, but you can compare different cards by looking for the annual percentage rate (APR), ( The APR represents the cost of credit on a yearly basis represented as a percentage. It includes interest and other costs as amortized over the life of the loan.) which all card issuers are required to disclose. A card’s APR doesn’t include any late fees, annual fees or other charges, so if you’re comparing rates, be sure to take into account all additional fees.

Secured Credit Cards
Another option you can consider is a secured credit card, which means that your card is attached to a savings account that is pledged to the bank that issues the card. You deposit a sum of money that you won’t be able to touch, but you can charge up to that amount on your card. The deposit account is in your name, but if you don’t pay your bills, the card’s issuer can take what you owe out of your account. Secured cards may be a good choice if you’ve had credit problems, and are having trouble being approved for a credit card. If you regularly pay what’s due on a secured card, you may be able to qualify for a regular, unsecured card after a certain period of time. (If you have a secured card and believe you’ve demonstrated your creditworthiness, don’t hesitate to ask for a regular card. Even if you have to wait a bit longer, you may help speed up the process by indicating to the lender that you’re interested in receiving a regular bankcard, and may be shopping for such a card with other lenders.)

Charge Cards
Charge cards let you make purchases as you would with a credit card, and usually don’t impose a credit limit or state an APR. But you have to pay off the entire amount you’ve charged each month, rather than carrying a balance as you can with a credit card. Some well-known charge cards are issued by American Express, Diner’s Club and Carte Blanche.