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Credit cards offer their holder a safe and convenient way to make payments whilst also providing a flexible way to borrow each month. When a credit card is used to make a payment, what is effectively happening is the card issuer is lending the holder money to make the payment. The card issuer will send the card holder a statement at the end of every month which will detail all the transactions made by the holder over the course of the month. The card issuer usually offers the card holder a certain amount of time to make a payment without charging interest. If the holder manages to pay the entire balance off, then no interest is charged at all. Credit cards offer a number of advantages.
Credit Card Benefits
Free short-term credit As long as the card holder pays the entire outstanding balance in full at the end of each billing cycle by the time the payment is due, the holder is getting short term credit completely free of charge.
Credit cards also enable holders the ability to make convenient and safe payment for goods and services both in Australia and internationally. This means the card holder can use the credit card to make purchases by mail order, phone or internet.
Purchase protection – Both retailers are issuers of credit card a responsible for purchases that are faulty. This means if a card holder uses the card to make a purchase that ultimately turns out to be faulty, or never receives for whatever reason; the card holder is entitled to claim a refund from the card issuer.
Fraud protection – Card holders who find their card details have been used fraudulently are not liable for any payments made by criminals using their card.
Incentives – Card issuers often provide incentives to holder so that they use the card more often, and this can include air miles, loyalty points and cash back.
The credit card is the only truly global currency and payments using credit cards are accepted in almost all countries around the world.
If you are looking for a credit card deal then the financial comparison site Money-AU is the best place to begin your search. As a financial product aggregator, Money-AU shows a range of different options from a number of different banks organized in an easy to understand manner. This allows consumers the opportunity to make a quick and informed choice, enabling them to select the product that is most suitable for them.
Credit cards give their holders immediate access to a pre-arranged amount of credit which can be spent anyway they want, so long as the card issuer is paid back. Credit cards work in exactly the same way as debit cards, and come with a pin number and a chip. When a holder makes a purchase with a credit card, the holder is given a grace period where no interest is charged (typically 55 days). Once this period is over interest and fees start being charged.
The amount of interest and fees that are charged depends on the card. The best way to compare credit cards is to use the Annual Percentage Rate (APR) that each card charges. This is the rate of interest the card issuer charges once the interest free period ends and is charged on a monthly basis. For example a borrower who spends $500 on their credit card that has a 16% APR would be charged $6.67 in interest every month to hold that debt.
Interest charges can quickly accumulate for borrowers who are not careful. All card issuers expect borrowers to make a minimum payment at the end of a billing cycle, and this is usually 2.5% per cent of the outstanding balance, which is then added to the interest charge. In the above example, where the borrower carries $500 in debt, the minimum payment would be $19.17 and even with that payment, the amount of debt outstanding would remain the same. Borrowers seeking to avoid the minimum payment trap should pay off as much of their debt as is possible at the end of the month and should also respect their credit limit. Card holders who either max their credit cards at the end of each month or miss payments will likely incur significant charges.
The best way to avoid such problems is to check the balance of the card regularly and to either make regular payments by setting up a direct debit facility.
No matter what you are looking for from your credit card, whether it is low interest rates, balance transfer deals or rewards schemes, Money-AU is your one stop shop for comparing credit card deals.
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The economists are basing their prediction on the back of a weak Australian economy and modest gains in the global economic outlook. Continue reading
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