Like most things in life, they have two sides to a point of view: a credit card is a convenient financial tool which allows you to buy things when you need them and pay later; or a credit card is the fastest, easiest way to get under a mountain of debt.
Which is it actually?
It depends on who’s telling the story and like most things in life, both sides are right. At CreditCardsMasters.com, we have set out to untangle the story of credit cards and how to use them wisely and well.
According to a financial literacy survey by the National Foundation for Credit Counseling and NerdWallet, an online resource for financial advice, “…roughly 2 in 5 American adults give themselves a grade of C, D or F on their knowledge of personal finance.” Nerdwallet spoke to three different people about their experiences with credit cards.
Excerpts from NerdWallet interviews:
Understanding the credit card
- Credit Cards have been around for over 60 years. But it still seems to be the one financial instrument that leaves us all confused and confounded. Most of us fail to understand how they work, how to not fall into a mountain of debt, how to maximize the benefits of revolving credit, how to use them smartly and sensibly – in short, make credit cards work for us, instead of the banks, finance companies and retailers that issue them!
- A credit card is a method issued by card holders (consumers) as a means of payment. It allows the cardholder to buy goods and services, based on his or her promise of paying for them, within a fixed time limit. The bank issuing the card creates a revolving account and approves a credit limit for the card holder – the cardholder than borrows against that limit to pay the merchant he is buying from or withdraws money as a cash advance, the latter not being such a good idea as the interest on this is much higher.
- Credit cards allow the consumers a continuing balance of debt, subject to interest being charged. A credit card is not a cash or debit card, which are both used like money and depends on the consumer having enough balance in is his account to cover the transaction. A credit card is not a charge card – the latter requires the balance to be paid in full each month, on the due date. The other difference between a credit card and a charge card is that a credit card involves a third party who pays the seller and is later compensated by the consumer, whereas the charge card simply defers the payment to an agreed upon, later date.