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Introduction To Credits Cards


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Important Disclaimers

This page makes references to brands such as American Express, Costco, Discover, JCB, Mastercard, and Visa.
This website has no association of any kind with any of those brands.
In no way whatsoever does this website speak on behalf of any of those brands or any other third party.

This page and the pages to follow will introduce charge and credit cards as issued in the United States.
If you have ever taken an academic course where the teacher or professor mandated some minimum length, you may have found it challenging to meet that requirement.
When editing an introduction to credit cards, the challenge is just the opposite: how to keep this page as concise as possible while still communicating some minimum body of knowledge.
The cards in the photo for this page all happen to be Mastercards.
A photo containing a card from each of the major payment networks might have been more appropriate for this page, but I did not come across one that I found to be aesthetically pleasing and was free to use. Furthermore, in contrast to posing with your cards poking out of your pocket, you should keep both your physical cards and their account information secure.
For those of you outside the United States, other than the three bullets below, I have no idea how any of this information may or may not apply to you.

If you have ever taken an academic course where the teacher or professor mandated some minimum length, you may have found it challenging to meet that requirement.
When editing an introduction to credit cards, the challenge is just the oppossite: how to keep this page as concise as possible while still communicating some minimum body of knowledge.

The headings and some of the text have mouse-over effects to liven up the page.
Those effects are independent of your browser's copy-paste functionality.
If you intended to send an excerpt from this page to your wife but mistakenly sent her a prior text intended for your mistress, that is on you not me.
I have not decided whether this page will contain advertising.
The core content of this page takes up even most desktop screens, but one or more advertisements created by skilled graphic artists might enhance the existing text only layout.
Even without advertising and with some simplifying assumptions, it is difficult to present this much information even on a laptop or desktop screen.
On a cellphone screen it is that much more challenging.
To mitigate that, there are some navigation buttons below with which you can jump to sections within this page.















Annual Fee

A charge or credit card may or may not have an annual fee.
If a charge or credit card has an annual fee, that fee may or may not be waived for the first year.

Depending on the value that a given card with an annual fee offers, that annual fee could be anywhere from a complete waste of your money to an incredible value.

Annual Percentage Rate ( APR )

A credit card's annual percentage rate refers to the interest that would be charged over the course of a year.
If you buy goods and services and you always pay your statement balance in full by your due date, then explaining how the annual percentage rate will impact you is easy.
You will not owe interest.
That is the explanation.
However, if you do any one or any combination of the following, then the explanation becomes more complicated:

Balance Transfer

Using a balance transfer is the act of paying one credit account with a credit card from a different issuer.
A given credit card may or may not not have the option to transfer the balance from another credit account to it.
If a credit card does give you the option of paying another credit account, the terms offered may or may not be favorable.
Even if a given credit card has a balance transfer option, you cannot pay one charge or credit account with another credit card if both accounts were issued by the same financial company.

Charge Card versus Credit Card

Historically, there was a clear difference between charge cards and credit cards.
For a charge card, the entire balance was due at once whereas with a credit card, you could choose to pay your balance over time.
American Express has slowly been introducing pay over time type features to its charge cards such that the distinction between charge cards and credit cards is growing fuzzier.

Deferred Interest

The explanation of how statement periods work on the Credit > Credit Cards > Charge Card vs Credit Card> page will usually apply to store cards.
For store cards, you also need to be aware of deferred interest options.
A given store card may or may not have a deferred interest option.
With deferred interest, usually the interest will accrue but will only post to your account if you fail to meet some stated condition.
For example, you may need to at least make minimum payments, plus pay off the entire balance by a given date.
Regardless of whether your card has a deferred interest option or not, you still need to make at least the minimum payment.
If you fail to do either or both, then you would be billed for interest since the initial transaction.

Fees For Merchants

This section applies to both charge cards and credit cards.
For the remainder of this Fees For Merchants section where I say credit cards please interpret that to include both charge cards and credit cards.
A given provider of goods or services may or may not accept credit cards.
If that provider of goods or services does accept credit cards, that business will be paid the total transaction minus a fee of approximately 3%.
The fee will be split among:

  1. The credit card processing company, such as Square.
  2. The payment network of the credit card, such as American Express, Discover, Mastercard, or Visa.
  3. The issuer of the credit card. Examples would be American Express, Discover, a bank, or credit union.

Mastercard and Visa were intentionally excluded from bullet three.
Mastercard and Visa are intermediaries between merchants that accept credit cards for payments and financial institutions that issue credit cards.
American Express and Discover both issue credit cards that run on their own payment network, and in some cases also license other companies also use their payment networks.
Whether on cards issued by American Express or on cards issued by other financial institutions to run on the American Express payment network, historically American Express charged a higher fee than Discover, Mastercard, and Visa.
That may no longer be the case, but because of that history even in the United States, American Express acceptance is not quite as good as Mastercard and Visa.
Outside the United States it is an even bigger issue.

Gift Cards

There are all manner of gift cards, and there are serious problems with most of them.

Approach anything to do with gift cards with extreme caution.

Payment Network

A charge or credit card issued inside the United States will run on one of the following payment networks:

Product Change

As with other financial decisions, please do your research before you apply for a given credit card.
In some cases, applying for a lower tier credit card than you intend to eventually have can be part of a deliberate strategy.
For example:

In the United States, the Card Act means that you cannot product change a personal charge card or personal credit card to a card with a higher annual in the first year of having that card account, even if you specifically request such a product change.

Promotional Annual Percentage Rate

A new credit card may or may not come with a promotional interest rate offer.
The following 3 types of transactions could all potentially have different interest rates:

If your new card or existing card has a promotional interest rate, please make sure you understand the terms.
A promotional rate might for example apply only to purchases or only to balance transfers.

Secured Card

If you have no credit or damaged credit, it is possible that the only way for you to get a credit card in your name is with a secured credit card.
It is possible that that is the case, but not an outright certainty.
The bank that you ordinarily use may or may not be open to opening your first unsecured credit card.

Sign Up Bonus

Charge card and credit card sign up bonuses are among the few things in life that seem too good to be true, but are in fact actually true.

The End

What credit card is best for you?
Rather than say "You are preappoved!" for whichever credit product pays me the highest commission for those visitors that actually get approved, regardless of whether a given customer will actually be approved, determining the best credit card for you is something that you will need to decide.
To paraphrase Winston Churchill, this is not the beginning of the end, but rather the end of the introduction.