Credit cards are now slowly replacing cash as the currency of choice. With the rising cost of producing bills and coins, coupled with the decreasing safety of traveling with large amounts of money on hand, credit cards offer a convenient alternative to a bulging, clanking wallet.
As a result, more and more banks are offering credit cards, which are bundled with incentives in attractive, purchaser-friendly packages. Such incentives may include one or more of the following.
A rewards system or points system can allow you to accumulate points as you increase your credit card purchases. Accumulated points can allow you to redeem prizes such as electronic gadgets or gift certificates. Some credit card companies also offer a points-and-miles reward system, where points earned from credit card purchases are converted to travel miles, allowing buyers to avail of ticket discounts, or even to fly for free.
A rebate system can allow you to redeem cash, or get your “cash back" after purchasing essentials such as groceries or gasoline. For a minimum purchase using your credit card, a portion of your spending can be returned to you.
Credit cards cost money to maintain and produce, and most banks will charge hefty annual fees. Most credit cards, however, will have a free annual fee on their first year of use.
Credit cards users can also be given discounts at partner establishments, such as restaurants, hotels, or travel agents. Company credit cards may offer even larger discounts when office equipment or supplies are bought at certain stores.
Extension cards are important for parents who may not have time to shop for their children. Such cards share the credit limit of the main credit card, which should curb any potentially damaging shopping habits.
These incentives are designed to attract more and more people to using credit cards. These incentives, however, also carry their own disadvantages.
Points systems will often make prizes appear more expensive than they would be if you had purchased them instead. Although point systems make it seem as though you are saving money, they often do exactly the opposite: they encourage you to spend more and charge more to your credit card in order to exchange points for inexpensive items.
Most rebates will be implemented after high purchase amounts, forcing you to spend, and hence, charge more to your credit card.
You will have no guarantee that extension cards will be used wisely. Some credit cards, moreover, are subject to “hidden charges": these taxes are imposed only after the bill is issued, and may lead to you paying more to maintain your credit card.
If you are interested in purchasing a credit card, then take note of the advantages and disadvantages of the incentives that come with credit cards and credit card purchases. In particular, take note of the following.
Consult with your local bank on all the charges that will be billed to you. Such “hidden charges" may include taxes, membership fees, or points redemption fees.
Do not be swayed by the promise of convenience that credit cards offer. If you are a spendthrift, credit cards may actually lead to you spending more. Study your spending habits and know your savings before enrolling in credit card programs.
If you have been issued credit cards in the mail, but are no longer interested in them, then destroy these cards and inform the credit card company about your decision immediately. This will keep potential “identity thieves" from using your credit account.
Credit cards should be your partners in budget and spending, and their adjoining offers should help you make better purchases. Learn to use your credit card wisely, and you will find yourself enjoying the convenience that credit cards offer to those who know how and when to use them.
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