How a Credit Card Can Be Your Friend
We have all heard countless stories of people over their heads with credit card debt-maxing out every card they own, then only being able to afford the minimum monthly payment. High interest payments shackle people to their debt for years, not to mention the significant income drain the finance charges have on their families.
It is unfortunate that many Americans must live with this reality, since with some financial discipline, this delimma is avoidable. When a spending plan is developed and followed, a credit card becomes no more dangerous than any other form of payment.
When credit card bills are paid in full each month, credit card fees and finance charges do not accumulate. With a little extra bookkeeping from a spending plan, a credit card is transformed from being a burden to a very rewarding financial partner-since it provides the following advantages over other forms of payment:
· Rewards Programs.
Many credit card companies offer loyalty programs to reward those customers who use their cards more. Rewards usually come in the form of points or cash. Depending on the company, the points can be redeemed for things like restaurant gift certificates, hotel stays, airfare, vacation packages and more. Cash cards typically pay a 1% rebate on your purchases, which makes for an extra $180 a year on monthly spending of $1,500. This level of spending is easily achieved by putting all your purchases on a credit card (including utility bill payments). There are even cards that pay more than 1% for particular types of purchases like groceries or gas, such as Citi's Dividend Platinum Select card.
· Perpetual 0% Loan.
When you use a credit card, you are using the bank's money to pay the store instead of yours-for free. While you're waiting for your statement to arrive, your money can continue to work for you in an interest- bearing account, such as ING Direct's Orange Savings. Unlike a debit card that continually reduces your account balance, using a credit card preserves your entire bank account balance for earning interest until your statement's due date. That's an extra $35.25 a year based on a $1,500 balance at today's rate of 2.35%*.
· Fraud Protection.
If your credit card number is used fraudulently, by law your maximum liability is $50. This is not true of a debit card. A perpetrator can easily use your debit card as "credit" transaction in retail stores or online. This type of transaction does not require a PIN number to be entered, and is especially dangerous since a thief can clean out your entire bank account in short order.
· Loss Protection.
Unlike cash which is gone for good if lost, a credit card can be replaced within days of reporting it to the issuing bank. In the meantime, you're protected against unauthorized use by anyone who finds the lost card.
· Warranty Coverage.
Many MasterCard credit cards warrant your purchases above and beyond that offered by the product's manufacturer. Your purchases made with one of these cards get an extra level of protection for free. See MasterCard's website (http://www.mastercard.com) for the full scoop on their coverage terms.
· Purchase Protection.
Another benefit MasterCard offers on most of their cards. With their Purchase Assurance plan, your purchases are automatically insured against damage or theft for the first 90 days, also at no additional cost to you.
With all of these benefits over other forms of payment, credit cards can easily become your favorite way to pay. Instead of dreading your credit card bill each month, it can become a pleasant reminder of your money mastery.
Copyright 2005, Jim Hood
Jim Hood is senior contributing editor at the Discount Shopping Service Guide. He frequently writes credit card offer reviews and articles on money-saving strategies for shopping online.
* Rate quoted from ING Direct on January 4, 2005.
MORE RESOURCES:
 CBS News | Tighter credit card limits add to woes MiamiHerald.com, FL - Now credit cards may become the next focus of the credit crisis. BY FRED TASKER Maria Osorio, 62, of Sunrise, never meant to run up her credit cards the way ... Banks must reveal full exposure to sub-prime Credit Crisis Collapse What Happens Next? Credit freeze sees small cracks |
 New York Times | Bush: US will work with partners on credit crisis The Associated Press - WASHINGTON (AP) — President Bush says world's wealthiest industrial countries will work together to attack the credit crisis spreading around the globe. ... Bush Vows to Resolve Crisis As financial crisis deepen, world leaders gather in Washington World finance chiefs grasp for solutions in firestorm |
 Boston Globe | Global leaders seek answer to credit crisis San Francisco Chronicle, USA - At the same time, loan markets everywhere remained broken, especially the critical wholesale credit markets, in which financial institutions lend each other ... Video: Bernanke: More Economic Pain Ahead TREASURIES-Surge in Europe as shares skid on credit woes Stocks down despite government moves to free up credit |
 The Associated Press | US will work with partners on credit crisis: Bush CBC.ca, Canada - It was the 21st time in 26 days that the president has spoken publicly about the credit crisis gripping financial markets and dragging down stock markets. ... Meeting G7, Bush Vows World Economic Fix |
 New York Times | Lehman Credit-Default Swap Payout Could Climb as High as $365 Billion Washington Post, United States - By Heather Landy NEW YORK, Oct. 10 -- In what may shape up to be the most expensive payout ever in the credit-default swap market, sellers of insurance ... STOP FINANCIAL WMD'S: Credit Default Swaps Insurance on Lehman Debt Is the Industry’s Next Test Lehman Credit-Swap Auction Sets Payout of 91.38 Cents (Update1) |
Is my credit union safe? Los Angeles Times, CA - By E. Scott Reckard, Los Angeles Times Staff Writer The government-run National Credit Union Share Insurance Fund insures most deposits at credit unions, ... Got Your Money in a Credit Union? You Too Are Safe In tumultuous financial times, credit unions might be an option to ... LETTER: Your money is safe with credit unions |
Fears Grow That Tight Credit Could Crush GM, Ford NPR - Standard & Poor's downgraded the credit of both companies and their financing arms this week. AFP/Getty Images Ford F-150 trucks sit at a dealership in ... Video: Money Minute: GM, GE, Oil GM, Ford too big to fail? CREDIT WATCH HITS GM, FORD |
Financial troubles spread to credit unions Los Angeles Times, CA - By E. Scott Reckard, Los Angeles Times Staff Writer It's not just giant banks on the brink these days: Losses are clobbering nonprofit credit unions that ... |
 New York Times | Credit cards, credit crunch: consumers feel pinch as issuers `go ... Newsday, NY - The credit crunch and weak economy also are taking a toll on credit cards. Perhaps you have noticed that you're receiving fewer offers for credit cards in ... Your Money One Thing You Can Control: Your Credit Score |
 Boston Globe | Transcript: President Bush's Radio Address FOXNews - The Fed has joined with central banks around the world to coordinate a cut in interest rates — a step that should help free up credit. ... Partial Tax Exemption Will Unleash the Free Market and Buoy Our ... Text of Bush's remarks Friday on the economy Comprehensive strategy to tame crisis: Bush |
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