Credit Card Basics For Amateurs

By Susan Lou, July 14, 2010

Credit cards have transcended all boundaries and are now more of a necessity rather than a luxury. Right from the time a person reaches the age limit specified by the bank, they apply for their first credit card. While this may seem to be the right thing to do in order to establish a good credit history, there are a few basic points that every person should be aware of before they obtain their card.

First of all, it is important to know that every card comes with a particular credit limit. After every purchase you do using the card, the balance reduces. You have to be careful and ensure you spend within the limits offered to you by the bank. Overshooting the credit limit can lead to the bank charging you 'over the limit' fee which is always on the higher side.

At the end of each billing cycle, you will be sent a billing statement by the credit card lender. Each billing cycle ranges from 29 to 31 days depending on the lender. The balance carried over from the last billing cycle, along with the purchases made in the current billing cycle, is collated and additional fees, if any, are added to this amount to arrive at the final amount due. Once this billing statement arrives, you will have a time span of 14 days to make your payment. You can either choose to make the minimum payment due on your card or pay off a part of the total amount due. Not making your payment on time can lead to the bank levying late payment charges which further enhance your credit debts, thus increasing your financial burden.

There are various fees that are levied on your account depending on the credit card lender you choose. some of the most common fees applicable to credit cards are annual fees, services charges, financial charges and late payment fees. However, there are banks that levy many other charges like the over the limit fee and inactivity charges. It is imperative that you ask your lender for all the charges that will be applicable on your account before you obtain your credit card.

Most often than not, people overlook these simple things and end up with credit reports that are not very impressive. If you want to build a good credit history, then, it is imperative that you understand how the credit card system works and make your payments on time.

Susan Lou

Susan Lou is a business consultant with a largest multinational corporation. With a Masters degree in Financial Management and Accounting from Princeton University, she has been an active member of the financial community. She nurtures an interest in writing and regularly writes articles related to finance and business.

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