how do credit cards work ?

Question

how do they check your credit limit etc when you're paying for goods in a shop? and just generally, how do they work?

Answer 1

credit cards are a line of credit that they determine - most start with no less than $300.00 -

You have a minimum payment due each much as long as there is a balance - always pay 5-10 dollars more and evenually your credit line will increase and your will pay off your balance quicker

each credit card charges interest for using them
they vary from 9% to as high as 30% this is based on your score and the offer they send you

some do 0% for a year then go to 9
should you miss your payment, they can and will increase the interest per your terms that you receieved with the card - all promotions will go away with a late payment

late payments will affect your score - always send your payment about 5 days before due whether regular mail and or net payments.

Basically with a credit card you buy now and pay later but there are always fees - should you not pay on time they will also charge a late fee generally $25-39. and if that late fee bumps you over your limit that they set there will be another fee of over the limit which is another 25-39$ - so if you have a credit card - keep your balance at lease 30% of your spending limit to keep your score good and pay your payment on time. If you are making payments really good and forget one, depending on the company, you may phone them and they will refund the late fee and not report it - this is provided you have not been late in the past year.

Good Luck

Answer 2

The store subscribes to a company that puts in the machines and hooks them up to a central network. Then it goes to the card's network, like Visa or MasterCard or American Express, from there it goes back to your bank or cardholder company to verify the account's existence. They keep track of how much you have bought and what they will allow.

Then there's 3 different kinds. the kind that takes the money you already have, called a debit card. Then there's the true credit card, where the company takes all the facts of your life, and sets a limit of what they think you can afford to pay them, sends you a bill once a month, and charges you interest, and Prepaid cards, that are purchased ahead of time with cash, have no personal link to you, just a nameless account number, like you see hanging on the registers at Wal Mart. (you can buy them not just for 1 store, but a Visa or MasterCard that can be used anywhere)

Answer 3

Credit cards are great financial tools. They can be more convenient to use and carry than cash, and they offer valuable consumer protections under federal law. At the same time, they're a big responsibility. If you don't use them carefully, you may owe more than you can repay, damage your credit rating and create credit problems for yourself that can be difficult to fix.

Whenever anyone, for instance, is approved for a credit card, a credit limit is provided by the credit card company, based on the individual’s credit score and/or credit history. Other terms and rules of the credit card will also be made available by the issuance company.

How it works? Use it wisely and responsibly. I would advice you charge not more than 30% of your credit limit each month, and pay it off when you receive the bill. For example, if your credit limit is $300; 30% will be $90. If you could pay off the bill each month, or, better still, allow a small carry over amount, after about two years, you would have established a credit history with a reasonable credit score. This would then place you in a more favorable position for a better interest rate should you decide to obtain a new credit thereafter.

Besides, charging small amount on your credit card each month is a better way to manage your credit as it would be easier to repay than when the card is maxed. Many credit card companies report monthly to the Credit Bureau(s), whether you pay on time or not. But if you cultivate the habit of paying your credit card(s) bills on time, even if it's just the "minimum payment," your credit score would gain points over time. The only disadvantage with this kind of payment is that the account would incur more interest charges over time. For example, a credit card debt of $700 could take years to repay if the minimum payment only is made each month, as against paying it off immediately the bill arrives. IT'S ALSO IMPORTANT YOU DON'T GO OVER YOUR CREDIT LIMIT AT ANY BILLING CIRCLE.

Although many credit card companies report credit balance to Credit Bureau(s), you could boost your credit score in no distant time if you would manage your credit account(s) wisely or responsibly as I've recommended above.

Good luck and best wishes!

Answer 4

they suck the life out of you.

Banks spend millions brainwashing people into thinking they need credit cards and a high fico score to make it in todays world. Not True.

spend less than you make and you will win with money.

Dont obsess with your fico score. The only people that obsess are the ones that are planing on borrowing lots of money and paying lots of interest.

A low score from not paying your bills/debt is trouble. If you have 0 score from not borrowing money you can still get an apartment and a job and home loan.

A debit card will do anything a credit card will do except get you into debt. If it has a visa or mastercard logo on it, It has the same protection that a credit card has too. It says so on their website.

Debt free is the way to be.

Answer 5

Yes they check your credit limit.
You pay off the bill on a credit card at a later date - if you are sensible you pay it off as soon as you get the bill. Otherwise you end up paying loads of interest.
The bonus with a credit card is that goods bought with one are guaranteed by the card company. You can get up to 6 weeks between when you use the card and when the bill comes in allowing you greater freedom to buy things using the benefits of two months worth of pay cheque!

Answer 6

When you go to the store,and purchase items, the computer in the store reads your account information from the magnetic strip on the back of the card. When the sale is finalized the account number from the card, along with the total to be paid is sent to a financial network and submitted to the credit card company computer. That computer will compare the amount of the sale with your available balance in your account and if your available balance is sufficient, your purchase will be approved. If your balance is not sufficient, the sale will be declined.