Understanding Credit Cards

Understanding Credit Cards

by Jay Hayden

Summary: The credit score is the number that is in your credit report. In this article we will look at how your credit card score affect you and your ability to get financing and a credit card of your own. What is a Credit Card Account and How Does It Work

Do you have a credit card account? Do you understand how it works? It is a very complicated process, but it is pretty easy to explain. Here is a rundown on how a credit card account works.

You would start by going to a bank that is in the business of credit cards. They would give you a choice between an unsecured or secured credit card, this will all depend on your credit. You will be able to use the credit at merchants who take your certain credit card. The bank will give you a limit depending on your financial situation.

The bank that you go to does have a lot of credit cards available, a few of which are: Discover Card, Diners Club, and American Express. The most popular of the credit cards is MasterCard and Visa, because they are welcome at millions of stores all over the world.

When your card was issued at a bank you promise them that when you purchase something that you will pay them back. When you buy something at a merchant and sign the card slip you are telling them you will pay them back. That is the agreement.

When you are at lunch and go to a fast food restaurant, like McDonalds or Burger King, they will not have you sign the card slip. However, do not think just because you are not signing the slip does not mean you do not have to pay, you have an agreement with the bank you will pay.

There is a magnetic strip on the back of your credit card that is where the merchant gets your information to make sure you have money in your account. So, any merchant can quickly check any of your information.

Under the Fair Credit Billing Act if you feel there is a mistake you can file a dispute. Every month you will get a statement that will show how much you owe and a breakdown of your charges. When you look at your statement make sure you look over every detail.

Your problem asking, "How do the banks make their money?" The banks make their money by the interest that accrues if you do not pay your balance in full. The bank will give you a little time to pay off the total balance or there will be interest charged.

There are people that are set up with automatic payment and pay their bill directly out of their checking or savings account. But you are obligated to make a minimum monthly payment on your account.

There are a lot of people having credit card issues so they have unsecured credit cards which can be used any where depending on which merchant accepts their credit card account type.

When you are at higher risk on bad credit cards the bank will help you get the secured card. The secured card works by you depositing an amount into your credit card account, and this deposit becomes your credit card limit. If the money is out of your account the credit card will not work. What this means is you have to make sure that you put money in the bank to cover your cost. It is just like having a checking account.

This information should help you get started in getting your own credit card. Just know that your bank will help you get a credit card account by how your financial situation is and then you can get started and have your own credit.