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Credit Cards Advice

Credit Card Characteristics
Credit cards are a fact of life for most adults. They offer convenience (shop online or pay at the pump), safety (avoid carrying large amounts of cash), ease of travel (most hotels and car rental companies require credit cards), and leverage (charges can be reversed or disputed if a vendor is unsatisfactory). In addition, some cards feature reward programs in which cardholders can earn travel, merchandise, and other benefits for spending money.  

Types of Cards
When evaluating credit card offers, it's helpful to understand the many types of cards available and choose the ones that work best with your lifestyle.

• Gift Credit Cards These are prepaid credit cards that make nice presents and work just like regular cards (except that you don't get a bill each month!). They can be store-specific or general (like those from Visa or AmEx). Gift credit cards can't always be used online; check before giving one. The cards cost money--service fees, maintenance charges, etc. They may also expire, so don't let them sit around.
• General Credit Cards These are the MasterCard and Visa cards. Most of them allow you to carry a balance, but if you pay it in full each month you can avoid paying interest on your charges.
• Gas Credit Cards These new cards come in two forms: general cards that offer rebates on gas purchases, or those from oil companies. Some gas stations charge those with general credit cards extra to cover processing fees, which can wipe out the savings from the rebates. Using an oil company card eliminates the credit card surcharge and often gets you a rebate as well.
• Secured Credit Cards Offered to those with bad credit or no credit. Since you need a card to rent a car, reserve a hotel, or shop online, it can really cramp your lifestyle if you can't get one. Secured credit cards require that you deposit a sum of money and the card company keeps it as collateral for your loan. By paying on time, you can build a credit history and eventually qualify for a regular card.
• Student Credit Cards These are offered to students who typically have little or no credit history. Expect a low credit limit and a fairly high interest rate, because these cards can be risky for the lenders. Sometimes, a parent co-signs for the card, which can get you a lower rate. However, parents should be cautious about this because it can negatively affect their own credit rating if the student misses payments.
• Debit Cards These credit card lookalikes are attached to a bank account and can be used as ATM cards to make purchases. Your purchasing power, however, doesn't extend beyond your bank balance. Debit cards are more vulnerable to credit card fraud and don't help you build a credit history.

Whatever card you choose, remember that credit cards are for convenience; they don't allow you to infinitely spend more than you earn. You can best take advantage of the safety, convenience, and rewards programs of credit cards by avoiding overspending, being careful of credit card fraud, and managing your credit card debt wisely.

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