Credit borrowings - credit Cards - Loans

Credit refers to a business or individual borrowing funds or money loaned to them from a financial institution such as a bank and returning the debt at a later date. The debt is paid back with additional payments made on the loan in the form of interest and can be repaid over a period of 1 day to 30 years. Credit cards, home loans and personal loans are characterized as being domestic, personal or house hold borrowings. That is, they are personal loans, not for business purposes.

Business finance or borrowing, involves a business borrowing funds for its financial operations and is one of the most common sources of funding for a small business. Business finance credit or loan products usually consist of business credit cards, business overdraft and business loans. 

Credit Cards

A credit card involves accessing a line of credit using a plastic card containing information pertaining to the account holder who is also the card holder. Credit cards are issued by a financial institution and allow their account holders to purchase goods or services from a merchant on credit. The credit limit is generally set according to the account holders income and credit rating. An annual fee generally applies and interest is charged on any outstanding balance.

There has been much hype and criticism in the media about ' credit traps ' associated with uncontrolled spending and the credit cards offered by banks or other financial institutions. It is said some credit card users accumulate uncontrollable debt on numerous credit cards and many end up seeking consolidated loans to regain control of their debts. Whilst credit trap problems do exist when users lack restraint or fail to track their spending, a properly managed credit card can provide many advantages to users wary of the terms of their credit card contract and their spending limitations.

Features and Benefits of a credit card

• Credit Cards allow the user to transfer balances to and from financial institutions and banks
• Some types of credit card accounts allow choice between low interest rates or no annual fee
• Credit card accounts allow a choice of credit limit (limit is generally based on income earned and credit history)
• Credit cards allow the user to make purchases and pay bills online
• Many of these products provide a reward system such award points, travel rewards, rewards and rebates
• Providers allow people to apply on line with an instant decision
• Some credit card companies offer debt consolidation and debt relief
• Student credit cards usually carry a concession such as 'No Annual Fee'
• Credit cards are very convenient and easy to use (users don't need to carry large amounts of cash to make a purchase)
• Interest free period on purchases and most bill payments
• It is easy to book venues, purchase airline tickets, make donations and book accommodation over the phone or internet.
• Credit card users need to exercise care with card security and spending habits

Credit Cards - Possible questions to ask when choosing or comparing

1. What is the interest rate on this credit card account?
2. Does this credit card offer interest free days?
3. Is there an annual fee payable?
4. If I cancel the card will the annual fee be refunded?
5. How do I read my statement?
6. How often are payments required and what happens if I miss a payment?
7. What is the difference between paying the closing balance and paying the minimum monthly payment?
8. Are cash advances treated as purchases?
9. Is there an additional fee for an additional card?

Charge Cards

A Charge Card is a type of Credit Card. Charge Cards generally require full payment of the bill each month and do not allow carrying a balance forward. When a payment is made in full, a charge card does not charge interest. American Express and Diner's Club are examples of Charge Cards. High interest charges or the cancellation of the card may apply if the account holder falls behind in payments. If the account holder has the ability to pay the full closing balance of the card at the end of each month then the charge card is an alternative choice for those that want to have the convenience of using a card. Charge cards also offer rewards schemes.

Store Cards

Store Cards are generally offered to consumers by department stores. Placing a purchase on these cards may entitle the user to such things as extended guarantees, special offers or the opportunity to preview the sales. In most cases store cards charge a significantly higher rate than regular credit cards.

Affinity cards

Affinity cards are company branded cards that provide a way for companies to build customer loyalty as well as strengthen awareness of their brand and products. Affinity cards usually display the company's name and logo. The company often supports a cause and donate money each time a purchase is made. Affinity cards offer programs, which are generally sponsored by non profit organizations, professional societies, and lifestyle organizations. Affinity programs enable card holders to support organizations, usually through a percentage of each purchase that goes to the affinity partner.

Debit cards

A debit card is a plastic card that allow consumers to make a purchase over the phone, internet, or other places where only credit cards are accepted and have the money directly debited from their own bank account. The debit purchases shows up directly on their bank statement. A debit card has many advantages for example they are accepted world wide and there are generally no annual fees or transaction fees for purchases. It is important to note that fees will apply if the account is over drawn or cash advances are made.