The ubiquitous credit card is used for payment of all kinds of goods and services and is in hundreds of millions of people's daily private and business life as well as at a multitude of online stores worldwide.

The term "credit card" refers to the fact that the credit card holder is not spending cash when they make a purchase with their card and in fact each time they make use of plastic money they are entering into a loan agreement with the credit card company.

In the case of MasterCard and Visa credit the card is issued by banks, in collaboration with the two credit card organizations that a administer the various transactions, taking care of all the accounting paperwork involved. Diners Club and American Express cards work differently in that the cash that you borrow on these credit cards is actually owed to the two companies, with MasterCard and Visa the money is owed to a separate bank or financial institution.

The four credit card companies are about equally divided in both the North American and European credit card markets. Virtual cards are a relatively new variation on the traditional plastic card but operate in exactly the same way. They serve cardholders for use when either shopping on the Internet or by telephone.

The main difference between Internet shopping and going to the local department store is that the Internet company do not need to physically handle a credit card and the transaction is all virtual and conducted with just a credit card number and other security identification.

The prepaid card is in fact the issue of credit card in return for a substantial deposit of cash with a card company. As such it only operates in the same manner as a credit card giving you the benefits of a credit card over a charge card but in fact the money involved is still belongs to the card holder.

The credit card is not based on credit, but is given in exchange for the cash deposit. The advantage is that the cardholder can for example make a purchase on eBay with his credit card when otherwise they possibly would have no other payment options.

Another advantage of the prepaid credit card is for making a deposit when renting a hire car. Most car hire companies now require a credit card as security deposit against damage to the vehicle, without a credit card you can be almost impossible to rent a car.

There are a variety of different types of credit cards such as store cards, platinum, gold or standard credit cards. They can all come with different privileges though in the past carrying a gold or platinum card carried some prestige with it, today there isn’t much difference. The only difference you may notice is that you may be charged an annual fee for gold card status.

Sometimes the gold and platinum edition can come with benefits such as coverage when you travel, but for the most part, carrying a gold or platinum card will not be much different than carrying a standard issue credit card. The most important aspect of any credit card you will be using is to read the terms and conditions otherwise known as the fine print. You may be hit with unexpected fees if you are unaware of any restrictions or stipulations on the use of your new card.

Payment Hierarchy on Unpaid Balances

You might think that when you pay your minimum fee each month that the money will go towards the oldest of your purchases. That is just wishful thinking. For example, if you have transferred a balance at 0% yet you are carrying a balance on purchases with an interest rate of say 16.9%, your minimum payment will go to the 0% transfer balance rather than the purchases at a higher monthly interest rate. This is how credit card companies make their money and keep you in debt indefinitely.

Is It Smart to Use a Credit Card When on Holiday Abroad?

In the past the only alternative to cash money was traveler’s cheques and these were not very convenient. Not all venues would take a traveler’s checque and they were cumbersome to carry. Now with the widespread use of credit cards around the globe, taking your little piece of plastic with you when you are on holiday whether at home or abroad, it is the preferred method of payment for most transactions.

It is safer to carry a credit card when you are on holiday as if it gets lost or stolen you can easily cancel the card and get a replacement in no time. It is a good idea to have the customer service telephone number handy so that if something like this should happen you are able to alert the credit card company immediately.

Though a credit card may be more convenient and safer to take along on holiday they do end up costing you more than if you had paid in cash. You will have to pay interest on the balance if you don’t pay it off immediately and you run the risk of spending more than you intended as it is much easier to use plastic than hand out your hard earned cash.

It doesn’t matter if you have a standard issue card or one of the platinum or gold cards as they all work in the same way with the same interest rate and payback options.

Not All Credit Cards Are The Same


There are in essence three different types of credit card in common use, credit cards, co-branded credit cards and revolving credit cards. Although plastic card itself may look exactly the same their individual functions are quite different. They are meant to be used for different kinds of credit in different circumstances.

The “credit card” is actually not what we usually think of as a credit card, it allows you to defer payment for a period of usually around 45 days without having to pay any interest so long as the total balance is paid in full. The full payment of the balance at the end of the agreed period is not an option it is a requirement. The best-known of this type of card is the American Express card.
 
The “revolving credit card” is actually what most of us would consider to be a credit card. It represents the payment instrument issued by a bank or financial institution that allows the payment by instalments for the goods and services purchased by the cardholder.

The use of this type of card entails an additional cost to the buyer due to the payment of interest on financing, within a maximum amount available with an agreed revolving credit limit. The operating costs of owning a card and revolving credit can be quite high with a substantial annual percentage rate (APR).

The third type of credit card is the “co-branded” credit card this also is issued by a bank or other financial institution. The difference with this type of card is that it is issued in collaboration with a third company that facilitates the distribution of the card to its customers.

These types of cards are usually issued by companies such as department stores, airlines, package holiday companies and are commonly known as “store cards”. These cards often offer additional services aimed at promoting the loyalty of the holders of the credit card. The operation is the same as a “revolving credit” card but usually involves a much higher APR.

Another option that has become available over the last few years is the “Prepaid” credit card which is a credit card with a decreasing value. It i have a rare s essentially a convenience card, a company issues a card in return for a certain amount of cash deposited with them.

As such there is no credit or interest involved, an example would be you deposit £500 with a company they will issue a credit card with a limit of £400. They face no risk from you failing to repay the money and you face no interest charges.