Credit Card FAQs
|Date Added: December 06, 2010 03:06:17 PM|
|For the novice cardholder, using and maintaining a credit card can be a difficult task. Fortunately, the following frequently asked questions and their answers should help anyone get started with credit cards in a timely manner. |
Q: What is the Difference between a Credit and Debit Card?
A: A credit card serves as a constant loan that gives the cardholder access to a line of credit, which must be paid back (with interest) in order to maintain good credit. A debit card is simply a convenient way for account holders to use money that is already stored in their checking or savings accounts, and therefore do not incur interest charges.
Q: What are the Risks of Using a Credit Card?
A: Improper or irresponsible credit card usage can result in financial debt that takes years to correct. Every purchase made with a credit card incurs some level of interest (except during the introductory period), so each purchase increases the risk of accumulating an unmanageable amount of debt. When used properly, there is very little risk involved with using a credit card.
Q: What are Pre-Approved Credit Cards?
A: Contrary to popular misconception,. A pre-approved credit card offer does not mean you are automatically approved. It simply means you may be eligible for approval because you have passed a preliminary screening.
Q: What's the Difference Between Fixed and Variable Interest?
A: Although both fixed and variable interest rates are subject to change with at least two weeks’ notice, a variable interest rate is guaranteed to fluctuate, whereas a fixed interest rate rarely changes. Sometimes, if a cardholder defaults on a payment, the fixed interest rate may be raised.
Q: Is it Good to Have Multiple Credit Cards?
A: having multiple credit cards can improve organization and provide a plethora of benefits by providing access to several rewards programs at once. However, it can also be confusing for some, and it can lead to unexpected debt accumulation if all of the cards are used too frequently.
Q: What is a Balance Transfer?
A: A balance transfer is the process of transferring one card's balance to another. This is usually done as a method of debt consolidation, as the cardholder will transfer an existing balance to a new card that is in the zero percent introductory period, in order to pay off the debt with no interest added. It is important to note that some credit cards charge balance transfer fees.
Q: How Do I Receive a Copy of My Credit Report?
A: Regularly reviewing your credit report is an essential aspect of maintaining a good credit score. Credit reports are issued by the three main credit reporting agencies – Equifax, Experian, and TransUnion. Contacting each of these agencies via phone or online is the quickest way to obtain a copy of your official credit report.