Credit Cards Guide
The credit card history can be traced as far as two hundred years ago, when currency exchange had just started out. People operated different types of businesses, including shops. And just as is norm in business, people always tried to buy items on credit. To remember the specific customers who owed certain amounts of money, shopkeepers kept records.
However, instead of using the normal names to keep the records, shopkeepers opted using a system of numbers. This was the first significant occurrence in the development of credit cards. It is not until the year 1951 that the Franklin National Bank came up with credit accounts that allowed their customers borrow money and repay it, without having to necessarily qualify for a loan.
Slowly other banks adopted this system, but it only allowed the use of credit cards within their localities. The need to use the cards beyond these localities prompted the creation of credit cards like master card and visa card.
Applying for a credit card
Applying for a credit card entails assuring your creditors that you are capable of repaying the money credited to you. Creditors run a business that is full of risk. That means it is not easy for someone to win over their trust, as far as credit card application is concerned. That is probably why many people consider it to be a stressful process.
On the contrary, it is a very easy process as long as one is prepared and has all the requirements that creditors want. One of the most important aspects, for example, is one’s credit report. A good credit report that shows one’s financial responsibility is a plus in applying for a credit card. Creditors tend to favor this category of individuals since they are sure to make money from them.
Another factor that is looked into in the credit card application process is the debt to cash ratio. To qualify for a credit card, one should have a good debt to cash ratio. In fact, a wise way of ensuring you are comfortable in the repayment of money owed to creditors is to ensure that you are not paying more than twenty five percent of what you take home to your debt. You should also ensure that you repay all your debts before applying for a credit card. Finally, it is important to note that the higher amount of credit you apply for, the stricter the requirements you are expected to meet.
Pros and Cons of Credit Cards
Credit cards have their advantages and disadvantages. It is upon you to weigh these two and decide whether to get a credit card or not. Among the pros of credit cards is the fact that it gives you the ability to cater for the emergency expenses. Online purchases are mostly done via credit cards and therefore, it is ideal for someone who wants to buy something online.
Credits cards are also very useful in making real time reservations like air ticket booking, car rental etc. Sometimes when buying something, you may discover a problem with it and you may therefore want a refund of your money. Such a process is hard when dealing with cash. However, when you have made the payment using a credit card, you can dispute the purchase that you may have made.
On the other hand, one of the cons of credit cards is the fact that it gives you the false feeling that you have money. This opens doors for impulse purchases. The interest you repay the money with is something else that is considered a con.
Finally, credit card users usually find themselves in a lot of financial trouble when they overspend money credited to them.