If you regularly use credit cards for purchases, you probably know the difference between the Mastercard logo and logos for other types of cards. What you may not know is that there are several different kinds of Mastercards to choose from. If you are in the market for a new credit card, take a look at our guide to the five different types of Mastercards to help narrow down your search.

Standard Mastercard

If you are just starting to build your credit history or you want a card that you can use to cover everyday expenses, you can’t go wrong with a standard Mastercard. With this type of card, you get zero liability protection for unauthorized purchases. You also get complimentary Mastercard ID Theft Protection, which allows you to monitor your credit file for changes that could indicate fraud, such as new credit inquiries, an address change, or a new account opened in your name. Plus, you can enjoy Mastercard Global Service, which gives you access to 24/7 customer service assistance with lost and stolen card reporting, emergency card replacement, and emergency cash advance.

Some Standard Mastercards also offer credit card bonus and rewards programs, which let you earn cash back or reward points good for flights, gift cards and merchandise. The following are a few Mastercards that offer good bonus and rewards.

Mastercard Bonus Offers

Credit Card		Bonus and Rewards	Annual Fee
	Citi Strata Premier® Card	60,000 bonus ThankYou® Points after spending $4,000 in the first 3 months of account opening, redeemable for $600 in gift cards or travel rewards at thankyou.com. 3 Points per $1 on Air Travel and Other Hotel Purchases, at Restaurants, Supermarkets, Gas and EV Charging Stations. 1 Point per $1 spent on all other purchases	$95 rates & fees
	Chase Freedom Flex®	$200 Bonus after you spend $500 on purchases in your first 3 months from account opening. 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate. Enjoy new 5% categories each quarter! 5% cash back on travel purchased through Chase Travel, our premier rewards program that lets you redeem rewards for cash back, travel, gift cards and more 3% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and unlimited 1% cash back on all other purchases.	$0 rates & fees

World Mastercard

If you regularly travel outside the U.S., taking along a World Mastercard can give you peace of mind should the unexpected happen. World Mastercards can unlock unique travel experiences, give you preferred access to our most exclusive offers, including VIP events, insider opportunities, and special promotions. With this type of card, members can take advantage of Cell Phone Protection, which provides $1,000 in yearly coverage ($600 max per claim, 2 claims per year) if your cell phone gets stolen or needs repairs. Members can enjoy discounts on vacation packages, travel upgrades and savings on golf, spas, dining out and entertainment. Frequent flyers will also appreciate personalized airport concierge service at more than 450 airports worldwide.

World Elite Mastercard

A World Elite Mastercard is the obvious choice for travelers who want to enjoy a luxury experience wherever they go. With this type of card, you can enjoy discounts on rooms at selected luxury hotels in cities around the world. Members can also take advantage of complimentary upgrades and discounts on things like car rentals, cruise packages, vacation tours and airfare. You can even get discounts on chauffeur services or flights aboard private jets. If you need help booking your trip or run into a problem when you’re away from home, a personalized concierge is available to assist you 24 hours a day, 7 days a week.

Mastercard BusinessCard

Mastercard BusinessCard is designed to improve your productivity with digital solutions and tools that can help accelerate the growth of your business. Members receive discounts or vouchers on time-saving financial tools, such as 40% off on QuickBooks, up to $1,000 in Uber Freight load credit, etc. It also gives cardholders $125 in advertising credit after spending only $10 with Microsoft Advertising. In addition, it provides many travel benefits for business users, including airport concierge, car rental insurance, etc.

World Elite Business Mastercard

World Elite Business Mastercard gives you the purchasing power you need to take care of business, plus essential tools and services at your fingertips. It provides Cell Phone Protection, which reimburses up to $800 per claim with $50 deductible, up to $1,000 total per 12-month period, for covered stolen or damaged phone. In addition, card members can enjoy online booking with exclusive travel offers and benefits, plus 24/7 access to a Travel & Lifestyle Manager to assist with travel planning needs.

World Elite Business Mastercard from U.S. Bank

Credit Card		Bonus and Rewards	Annual Fee
	U.S. Bank Business Triple Cash Rewards World Elite Mastercard®	$500 in cash back. Just spend $4500 on the Account Owner's card in the first 150 days of opening your account. 3% cash back on eligible purchases at gas stations and EV charging stations, office supply stores, cell phone service providers and restaurants. 1% cash back on all other eligible net purchases. 5% cash back on prepaid hotels and car rentals booked directly in the Rewards Center.	$0

View the full list of Mastercard Credit Cards

Conclusion

With so many different types of Mastercards to choose from, it can be difficult to determine which one is right for you. The key to finding the best credit card is to consider how often you’ll use the card, where you will be making most of your purchases and what kind of fees are involved to make sure you are getting the best deal.

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A credit card statement credit is a payment issued by a business and posted to your credit card account. Such payment shows up on your monthly statement as a credit. It can then offset expenses in your credit-card billing statement.

Most Common Reasons that You Receive a Credit

Your credit card company or merchants that have billed your card for purchases are usually the ones issuing statement credits. For instance, typical credits include refunds from merchants, credit card sign-up bonus issued by your card issuer, or credit card rewards that you redeem points or miles for.

When you make a purchase with your credit card and return it afterwards, a store may refund you a credit back to your card. As a result, the credit will effectively erase the previous charge for the purchase. There might also be situations that you get credit for a partial refund. For example, if you shop for auto insurance and switch to a new insurance policy, your current insurance provider will refund you for the remaining portion of unused insurance.

Statement credits by card issuers are also very common. For instance, credit card bonus is frequently in the form of a statement credit. And rewards points or miles that you have accumulated can sometimes be redeemed for statement credits too.

Some cards allow you to apply credits with no restrictions. However, some other cards may only let you apply credits to your account to pay towards purchases in specific spending categories. Common types of category-specific statement credits include credit for travel, grocery, dining, etc. Sometimes you may need to use an online tool of your credit card issuer to choose qualifying purchases to apply your category-specific credits.

Statement Credit vs. Other Forms of Cash Back

When you earn cash back rewards, some credit cards offer the option of redeeming rewards for statement credits. Sometimes you may have alternative options to receive direct deposits to your bank account or physical checks to your address. If you choose to receive a statement credit, the credit can reduce the current credit-card account balance. In the situation that your credit is more than the current balance, the remaining portion of the credit will be carried forward to the next billing cycle.

Is receiving a statement credit better than receiving a physical check? If you have a balance on your credit card, it is more convenient to receive and to redeem for a credit. On the other hand, if you do not have a balance on your card or need cash for other purposes, it might be better to have a check, because it is always more flexible to use the cash for what you want.

Are Statement Credits Taxable?

Statement credits issued by merchants for purchase refunds are definitely not taxable. Statement credits by card issuing banks usually require you to make purchases before obtaining the credits. The credits reduce the account balance and they are similar to rebates. In general, if you have to make a purchase prior to receiving a credit, such credit is equivalent to a rebate on your purchases and rebates are not classified as taxable income.

If the cardholder does not have to spend anything to earn a credit, the credit might be taxable. However, most U.S. credit cards require cardholders to complete qualifying purchases before issuing a credit as a bonus or rewards. Therefore, these are not taxable income. When you have tax questions, it is always best to consult a tax adviser.

A statement credit on a business credit card may not be taxable income by itself, but the credit would reduce the net amount of purchases. Consequently, the net amount to be deducted as business expenses will be lowered and it would make the net taxable income for the business higher, thus creating a net effect of higher taxable income for the business.

Credit Cards that Offer Statement Credits as Bonus or Rewards

A number of credit cards give out statement credits for the sign-up bonus or as a rewards redemption option. Below you will find a few credit cards that let you obtain a bonus in statement credit:

Citi Credit Cards, issued by our partner Citibank

Credit Card		Bonus as a Credit to Account
	Citi Strata Elite℠ Card	For a limited time, earn 100,000 bonus Points after spending $6,000 in the first 3 months of account opening.
	Citi Strata Premier® Card	60,000 bonus ThankYou® Points after spending $4,000 in the first 3 months of account opening, redeemable for $600 in gift cards or travel rewards at thankyou.com.
	Citi Strata℠ Card	For a limited time, earn 30,000 bonus Points after spending $1,000 in the first 3 months of account opening.
	Citi Double Cash® Card	$200 cash back after you spend $1,500 on purchases in the first 6 months of account opening. This bonus offer will be fulfilled as 20,000 ThankYou® Points, which can be redeemed for $200 cash back.

American Express Credit Cards

Credit Card		Bonus as a Credit to Account
	Blue Cash Preferred® Card from American Express	$250 statement credit after you spend $3,000 in eligible purchases on your new Card within the first 6 months.
	Blue Cash Everyday® Card from American Express	$200 statement credit after you spend $2,000 in purchases on your new Card within the first 6 months.
	The American Express Blue Business Cash™ Card	$250 statement credit after you make $3,000 in purchases on your Card in your first 3 months.
	The Blue Business® Plus Credit Card from American Express	15,000 Membership Rewards points after you spend $3,000 in eligible purchases on the Card within your first 3 months of Card Membership.

Chase Credit Cards

Credit Card		Bonus as a Credit to Account
	Chase Sapphire Preferred® Card	75,000 bonus points after you spend $5,000 on purchases in the first 3 months from account opening.
	Chase Sapphire Reserve®	125,000 bonus points after you spend $6,000 on purchases in the first 3 months from account opening.

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Many of you may have observed that the “Minimum Payment” section on your credit card bill is notably lower than the total bill amount. The convenience of owning a credit card lies in the ability to defer payment, akin to a loan, and settle the amount at a later date. However, to avoid penalty fees, a minimum payment must be made every month. This minimum payment represents the smallest amount you are obligated to pay on your credit card statement each month.

Credit card companies are mandated to establish the minimum payment to facilitate the reduction of your balance, assuming no additional charges are added to your balance. It serves as a mechanism to ensure that cardholders make regular payments, albeit at a reduced amount, contributing to the gradual reduction of their outstanding balance.

Minimum Payment Calculation

Each credit card company stipulates its minimum payment calculations in the initial agreement you sign. This can be either a fixed fee or a percentage of your outstanding balance.

If your minimum payment is a percentage of your balance, it typically falls in the range of 1% to 5% on average. In cases where the calculation is based on a flat fee, it encompasses all fees and interest due for that month, along with 1 percent of the principal amount owed. The specific method for calculating the minimum payment is clearly defined in the terms and conditions agreed upon when you initially signed up for your credit card. Understanding these terms is crucial for responsible credit card management and avoiding potential penalties or fees.

Pitfalls

While paying the minimum on occasion may not be inherently harmful, it can become a risky habit. Relying on minimum payments can lead to a growing balance due to the interest accrued on the remaining amount and additional charges added to the subsequent month’s statement. If you continue to accumulate charges without making substantial payments, your balance may escalate, and this is often a pathway to debt.

Dependence on minimum payments becomes problematic when it doesn’t contribute to reducing your overall balance, especially if you keep adding new charges to your account. This cycle is a common factor in individuals falling into debt.

Beyond the financial consequences, failing to pay at least the minimum can result in penalty fees, damage to your credit rating, and in more severe cases, it may prompt the credit card company to take legal action to recover the borrowed funds. Responsible credit management involves understanding the potential pitfalls of relying solely on minimum payments and taking proactive measures to address outstanding balances.

Low Interest Credit Cards

While all credit cards come with a minimum payment requirement, the level of concern varies among different cards. If you find yourself relying too heavily on making the minimum payments, you can consider utilizing 0% introductory APR credit cards strategically. By making the minimum monthly payment on these cards, you can take advantage of the 0% interest offer for the remaining account balance over an extended period, often around 21 months or more.

Once the introductory period concludes, you have the option to explore another 0% interest credit card or opt for a low-interest credit card to mitigate interest costs. This approach can be a helpful strategy for managing debt more effectively, allowing you a temporary reprieve from interest charges and providing an opportunity to address your outstanding balance with a more favorable financial arrangement. However, it’s essential to be mindful of the terms and conditions of each credit card and to use these tools responsibly to avoid falling into a cycle of debt.

Recommendation of 0% Interest Credit Cards

Here are a few top 0% interest credit cards that let you borrow money for at least 12 months.

0% Interest for 21 Months

Credit Card		0% Introductory Interest	Annual Fee
	Citi® Diamond Preferred® Card	0% on purchases for 12 months and on balance transfers for 21 months. After the intro period ends, the go-to rate of 16.99% - 27.74% (variable) applies. (rates & fees)	$0

0% Interest for 18 Months

Credit Card		0% Introductory Interest	Annual Fee
	Citi Double Cash® Card	0% on balance transfers for 18 months. After the intro period ends, the go-to rate of 17.99% - 27.99% (variable) applies. (rates & fees)	$0

0% Interest for 15 Months

Credit Card		0% Introductory Interest	Annual Fee
	Citi Strata℠ Card	0% on purchases and balance transfers for 15 months. After the intro period ends, the go-to rate of 18.99% - 28.99% (variable) applies. (rates & fees)	$0
	Chase Freedom Unlimited®	0% on purchases and balance transfers for 15 months (rates & fees)	$0
	Blue Cash Everyday® Card from American Express	0% on purchases and balance transfers for 15 months. After the intro period ends, the go-to rate of 19.99% - 28.99% variable applies. (rates & fees)	$0

0% Interest for 12 Months

Credit Card		0% Introductory Interest	Annual Fee
	Blue Cash Preferred® Card from American Express	0% on purchases for 12 months. After the intro period ends, the go-to rate of 19.99% - 28.99% variable applies. (rates & fees)	$0 intro annual fee for the first year, then $95.

Small Business Cards with 0% Interest for 12 Months

Credit Card		0% Introductory Interest	Annual Fee
	The American Express Blue Business Cash™ Card	0% on purchases for 12 months from date of account opening. After the intro period ends, the go-to rate of 17.24% - 27.24% variable applies. (rates & fees)	$0
	The Blue Business® Plus Credit Card from American Express	0% on purchases for 12 months from date of account opening. After the intro period ends, the go-to rate of 17.24% - 27.24% variable applies. (rates & fees)	$0

0% APR credit cards are great for allowing cardmembers to hold a balance for a long period without accruing any additional fees. They are safer cards to use if you are worried about falling into debt.

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Why? Because an individual can be a business too. The type of the business is called a sole proprietorship, which is the simplest business entity. Sole proprietorship is completely legit and is recognized by the Internal Revenue Services (IRS). In a sole proprietorship, your name is your business name and your SSN is your business Tax ID. For example, you can be a sole proprietor if you are a self-employed CPA, or you are doing independent contract work for a company, or if you are just selling items through online sites like eBay or through garage sales.

When applying for a business credit card, you have to indicate your SSN and the Tax ID of the business, which you can simply put down your SSN for both fields. For the vast majority of business credit cards, even if you are part of a corporation or LLC, you will still be personally liable for business debts and credit card issuers use your own credit report to determine your qualification. That’s why they’ll always ask for your SSN. Once you have established enough business credit, your company will be recognized as a separate entity and your personal credit will not be as much of an issue.

For example, here is an example screen shot of applying for a business credit card. You can see that SSN is suggested as a valid option for the business tax identification number.

For most business credit cards, the credit card itself won’t show up in your personal credit report. This means that you can open many new accounts, max out the credit limits without affecting your personal credit score.

With many business credit cards offering attractive perks, don’t forget to check out those deals from time to time.

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Before You Call

Before you contact your credit card company about reversing a late fee or finance charges, make sure your payment has cleared. Don’t wait more than a few days, however, since you want to contact the card issuer before they report the late payment to the credit bureaus. Review your records to determine when you opened an account and check to see whether you’ve ever had any late payments before.

Be Assertive

When you call up the credit card company, be assertive in your request to have the late fees and finance charges removed. When you’re making your request, be sure to point out your solid payment history, your overall credit history and how long you’ve been a customer. If the representative you’re speaking to tells you they can’t help you, ask to speak to their supervisor. Let them know that the late payment was an accident and you regret the error, then restate your request. Be polite but persistent. If the credit card company won’t budge, you may need to consider whether you want to keep the account open. The card issuer may agree to waive the fees in order to keep you as a customer.

Late Payments and Your Credit

Consistently paying your credit card bill late can have a twofold effect on your credit. First, your card issuer is likely to label you as a problem customer and they may be less willing to reverse late fees or finance charges. There’s also the possibility that the credit card company could increase your interest rate, lower your credit limit, or close the account altogether.

Having multiple late fees on your credit history can negatively impact your credit score. When your credit score drops because of late payments, it can become more difficult for you to get approved for new credit. Your other card issuers may also decide to increase your APR or lower your limit if they view you as a greater risk because of your credit score.

Success Story

In April 2012, I missed making payments to my Capital One Spark Cash credit card after taking a long-distance flight and being distracted by jet lags. I didn’t realize I missed the due date of required payment until a few days later when my credit card was rejected for a purchase because the balance reached credit limit. I then quickly made the payment online. In my April credit card invoice, I was billed a past due fee of $39 and interest charges of $108.02. In the invoice of May, I was billed an overlimit fee of $39 and interest charges of $20.02. The total penalty would be over $200. See the following screen shot of the fees and changes in my two credit-card bills
  

I decided to call Capital One customer services to see if they could kindly reverse the fees and charges. I started the phone conversation by stating that I had been a loyal customer of Capital One and had used Capital One cards as my preferred payment card. I then explained the situation and reassured that I wouldn’t make the same mistake again. The representative kindly offered to reverse all the fees. The credit showed up in my June 2012’s credit-card bill. To Capital One’s credit, its services were great.

Final Word

If you’re stuck paying late fees or finance charges just because you missed a payment, you’re essentially throwing money away that could be used for something else. While it’s always best to pay on time and in full if you can, this is not always possible. If you’ve been hit with a late fee, don’t be afraid to reach out to your credit card company. Chances are, they may be more willing to help than you think.

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1. Check your credit report.

As long as you order your report directly from a credit reporting agency, requesting your own credit report will not hurt your score. To begin improving your credit score, request a free copy of your credit report and check for errors. You are entitled to one of each of your three credit bureau reports (Experian, Equifax, and TransUnion) for free every 12 months through AnnualCreditReport.com. Stagger them and request one every four months. Make sure there are no late payments incorrectly listed for any accounts, and that the amounts owed for each open account are correct. If you find errors, dispute them with the credit bureau.

2. Pay your bills on time.

Payment history is 35% of your FICO® Score! Delinquent payments and collections will hurt your score, and stay on your credit report for seven years. However, the longer you pay your bills on time, the more your credit score should increase. Older credit problems count for less, so the impact of a late payment will decrease over time. Avoid having balances on every card, because your score considers just how many of your cards have balances. So, charging $20 on two cards instead of $40 on one can possibly hurt your score.

• If you are paying on time every month but maxing out your limit, the bank thinks you are a spendthrift! If you cannot decrease your spending, then consider increasing your credit limit. Be careful not to also increase your spending habits.
• Another option is to pay your bills twice a month, once just before the statement closing date and second right before the due date. The first will likely reduce the balance that the credit bureaus see and the second helps to avoid interest or late fees.

3. Keep low credit card balances.

High outstanding debt can hurt your score. One of the major factors in your credit score is how much revolving credit you have versus how much you are using. The smaller the percentage, the better for your credit rating; optimum is 30% or lower.

4. Reduce the amount of debt you owe.

For some, reducing your debt might be more important than improving your score. The optimal payment plan is different for each person, but you should put most of your available budget towards the highest interest cards first, while maintaining the minimum payments on other accounts. You can also consider transferring your debt to a credit card with a lower interest rate, but keep in mind that balance transfer fees are inevitable and transfer rates expire.

5. Consider applying and opening new credit accounts.

Reestablishing your credit history by opening new accounts (i.e. credit cards and installment loans) responsibly and paying them off on time will raise your credit score in the long term. However, do not open them solely for a better  credit score. Also, if you have a short credit history, do not open a lot of new accounts too rapidly. The new accounts will lower your average account age and decrease your score. Rapid account buildup also looks risky if you are a new credit user.

• If you are not sure you are able to use credit wisely, consider a secured credit card, and make sure to choose one that reports to all three major credit bureaus.
• You might also consider asking someone – a friend, or family member – to make you an authorized user of a credit card they’ve had for a long time and handled responsibly.

6. Do not close existing credit accounts.

Closing accounts not only lowers the number of open revolving accounts, but also decreases the total amount of available credit, resulting in a higher utilization rate, or balance-to-limit ratio, and a lower credit score.

7. Contact a credit counselor.

If you are struggling to improve your score, contact your creditor to meet with a credit counselor. They may or may not be able to help your score immediately, but seeking assistance from a counseling service cannot hurt your score.

8. Be patient.

The final key to having a good credit score is patience. Credit is important to your financial health, and creditors want to see that you have the ability to maintain a good, responsible standing in the long-run. Having knowledge of how your credit score is calculated, along with the tips listed above, will help you on your way to improving and maintaining your credit score.

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1. Build your credit.

Building your credit score is important for big purchases in the future, such as a house or a car, or for obtaining loans, because a higher score also means lower interest rate on loans, which could amount to thousands of dollars in savings over the life of the loan. If you have poor credit, there are cards designed specifically for building or rebuilding your credit ratings so that you can access better deals in the future.

2. Get rewards and cash-back.

If you were already planning to go shopping, why not earn rewards from those purchases? You can research to see what different cards will give you the most benefits. If you fly a lot, consider an airline credit card that offers mileage or discounts.

3. Convenience.

It is just more convenient to carry cards and have some leeway in paying off large purchases or unforeseen emergencies. Using a debit card will take that money directly out of your account, but with a credit card, you can pay off a purchase over several months.

4. Protection between merchants and your money.

Extended warranties and protections. In most cases, purchasing on a credit card automatically gives you more choices if you encounter a problem. Many credit cards extend the manufacturer’s warranty, and some offer purchase protection of some sort if it is not covered by the warranty. For more info, see section 75 of the Consumer Credit Act.

5. Cut costs on overseas spending.

Most debit cards charge a foreign loading fee for purchases. Credit cards can as well, but some will waive this fee on transactions made overseas.

6. Renting a car/staying at a hotel.

Renting a car does not necessarily require owning a credit card as long as you can cover the deposit, but having a card means getting rental car insurance. Hotels also require a deposit to rent a room, but if you use a credit card, the deposit is merely a temporary authorization placed on the cardholder’s account, while on a debit card, that money is actually taken out and unavailable for other use.

7. Track your spending.

You can track your spending with cash as well, but with credit cards, there are many personal finance software packages that allow you to import your statements, analyze your spending habits, and locate areas where you can save money.

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How many credit cards should I carry?

There is no exact optimal number of open accounts; this will depend entirely on your situation. You should definitely have at least one card for convenience; when you rent a car, rent a hotel, travel abroad, or find yourself needing to cover emergency expenses, having a credit card and a decent monthly credit limit is favorable, especially if you do not have immediate cash in your wallet or money in your debit account to cover a large purchase.

What are the pros and cons of having one credit card?

PROS

• Having one card might make it easy to keep track of payments or purchases, as well as watch out for identity theft or fraud.
• A single credit card might help to minimize total spending.
• One account means only one annual fee, if any.

CONS

• Having one card can make it difficult to keep a low credit utilization ratio (amount of debt vs amount of credit available), which is important for maintaining a good credit score.
• Some credit card are not accepted everywhere.
• You don’t have a safety net if this card is stolen or compromised.

What are the pros and cons of having multiple cards?

PROS

• Lower credit card utilization/Higher credit score.
  Having more than one card allows you to spread out your balances, so you aren’t close to hitting the credit limit on one particular account. A higher credit limit also means lower credit card utilization.
• Represents your financial accountability. Having many different accounts generally shows that more lenders believe in your ability to repay debt. Having many accounts on your report also helps establish that you have a positive track record of responsible credit behavior.
• Prepared for emergencies. If a credit card company freezes or cancels your card because of potential fraudulent activity, you will have at least have a backup card as you wait out the 3-7 days it takes to mail in a new card.
• Better Rewards. A greater variety of cards could earn you better rewards. Some cards give higher rewards back for certain purchases, such as groceries and gas, while others give travel points when you travel or dine out. Sometimes, other cards offer special perks, such as buy-one-get-one free movie tickets or auto rental insurance.

CONS

• Having a short credit history could hurt your credit score. Don’t open new accounts solely to improve your score, because the number of cards you own falls under the smallest weighted category of a credit score: the type of credit you use.
• May impact your ability to borrow money. If you have too many cards with high credit limits, a lender might consider, ‘What if you ran those credit cards up, what would your debt-to-income ratio be?’
• Multiple cards is a hassle. Make sure you can juggle multiple balances and payment dates. Credit card companies can close inactive accounts, which will affect your credit score. If your card has an annual fee, instead of closing the account, consider downgrading to the no-fee version.
• Overspending. Having too much credit might trick you into spending more. If you have a high interest rewards card, make sure you don’t leave a balance on it, otherwise the rewards you get might not be worth the money you spend on interest.

What is the verdict?

The ideal for most is 3-5 cards, maybe one or two rewards credit cards for everyday use, and another a low-interest card for emergencies. Why not just have one? Because you want to earn rewards from your purchases, but rewards cards tend to have higher interest rates, so you don’t want to carry a balance on the card. If you start to use too much of your credit limit per account, you can add a new card, but you could also request to increase the credit limit. Frequent spenders should spread their debt out on 3-5 cards so that you are using under 20% of each card’s limit every month.

All in all, what’s most important isn’t the number of accounts on your credit report, but what you do with them. Before making a financial decision, think about how the number of accounts you have will affect other credit score factors; check your credit report to see how you are doing. In the end, having 20 accounts is no better or worse than having two, as long as you make sure to pay the bills on time and keep your balances low.

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Address on file is the address that is recorded in your credit card account. It is the address that you provided on your application to open the credit card, unless you have provided a notice of a change of address in accordance with the terms disclosed on the back of your bill, in which case that new address is the address of record.

Annual fee is a fee charged once a year for maintaining an account and for any special services.

Annual percentage rate (APR) is the interest rate charged on credit card balances expressed in a standardized, annualized way. This rate is applied each month that an outstanding balance is present.

Lenders are required by law to disclose the APR. The rate is calculated in a standard way, taking the average compound interest rate over the term of the loan, so borrowers can compare loans.

APR stands for annual percentage rate, and it is the interest rate charged on credit card balances expressed in a standardized, annualized way. The APR is applied each month that an outstanding balance is present on a credit card.

Available Credit is the amount of unused credit available. Available credit is computed by subtracting the outstanding balance from your total credit line.

Average daily balance is the average balance for each day in the billing period, calculated by adding all daily balances together and dividing that total amount by the number of days in the billing period.

This is the method by which most credit cards calculate your payment due. An average daily balance is determined by adding each day’s balance and then dividing that total by the number of days in a billing cycle. The average daily balance is then multiplied by a card’s monthly periodic rate, which is calculated by dividing the annual percentage rate by 12. A card with an annual rate of 18 percent would have a monthly periodic rate of 1.5 percent. If that card had a $500 average daily balance it would yield a monthly finance charge of $7.50.

Balance is the amount you owe on your credit card. When a consumer does not pay the monthly amount owed in full, and carries a balance over a monthly billing period, the card issuer charges the consumer for the privilege of borrowing, in an amount set by the card’s interest rate.

Balance Transfer occurs when the outstanding balance of one credit card (or several credit cards) is moved to another credit card account. This is often done by consumers looking for a lower interest rate. Many credit card issuers offer introductory balance transfer APRs that are lower than the standard rates.

Balance transfer fee is a fee charged by a credit card company to transfer a balance from one account to another. This fee can be anywhere from 1 percent to 5 percent of the balance amount. The fee may or may not have a cap — in other words, a maximum amount. Caps on balance transfer fees used to be common, but have become less so in recent years. Contact the credit card issuer for their specific fees.

Billing Cycle is the number of days in the billing period. It includes the day after the previous close date through the current closing date of the account.

Cash advance is cash withdrawn from the available credit of your credit card account. There is no grace period for cash advances. Interest accrues daily and at a higher APR than on purchases or balance transfers until the complete balance is paid in full. Credit card cash advances have many disadvantages for consumers. Generally, you cannot take a cash advance for the full amount of your available credit. A transaction fee, which is a percentage of the cash advance, is usually charged.

Cash advance check works like a personal check except the amount is charged to your credit card account. This check can be written to your choice of recipients and for any amount up to your available credit limit. These types of checks are posted as cash advances and will incur a transaction finance charge.

Cash advance fee is a fee assessed on the date a new cash advance transaction is posted to an account. A charge by the bank for using credit cards to obtain cash. This fee can be stated in terms of a flat per-transaction fee or a percentage of the amount of the cash advance. For example, the fee may be expressed as follows: “2%/$10”. This means that the cash advance fee will be the greater of 2 percent of the cash advance amount or $10.

The banks may limit the amount that can be charged to a specific dollar amount. Depending on the bank issuing the card, the cash advance fee may be deducted directly from the cash advance at the time the money is received or it may be posted to your bill as of the day you received the advance. The cost of a cash advance is also higher because there generally is no grace period. Interest accrues from the moment the money is withdrawn.

Cash advance rate – When consumers take out cash advances, they are usually charged a higher rate. The cash advance rate is higher because these loans are viewed as riskier for banks. The interest rate is typically charged from the moment of the cash advance.

Credit is a promise to repay a debt for purchases you make. It allows you to buy something today and pay for it later.

Credit bureau is a credit-reporting agency that checks credit information and keeps files on people who apply for and use credit. The Credit Bureau produces a Credit Report, which is a record of a consumer’s level of indebtedness and bill paying behavior. The agencies compile the report and release it to lenders and others as permitted by law.

Credit limit also known as Credit Line, this is the maximum amount you can carry as the balance on your credit card. If you exceed this amount, an Over-the-Credit-Limit-Fee may be imposed.

Credit score also known as a credit rating. Many lenders use this numeric calculation of your credit report to obtain a fast, objective measure of your credit risk, and consider your score when deciding whether or not to approve a loan.

EMV stands for Europay, MasterCard and Visa. EMV is a global standard for credit cards equipped with computer chips and the technology used to authenticate chip-card transactions. EMV technology provides extra security when credit cards are used in chip card readers. An EMV Chip-enabled credit card, often called “chip and PIN”, “chip and signature” or “Chip-enabled smart card”, securely embeds a cardholder’s confidential data in the chip instead of the traditional magnetic stripe, thus making it more difficult for fraudsters to counterfeit cards.

Finance charge is the charge for using a credit card, comprised of interest costs and other fees, expressed in a dollar amount.

Finance charges are the amounts billed when one does not pay their monthly credit card balance in full. The size of a finance charge will vary depending on the amount charged and the interest rate.

Float is when a cardholder makes a purchase or obtains an advance, the transactions may not post for a few days. The charge amount is not added to the balance of the account until the transaction does post. The time between purchase and posting is referred to as the float.

Grace period is between the date of the credit card billing statement and the date payment in full must be received before interest begins to accrue on new purchases.

If the credit card user does not carry a balance, the grace period is the interest-free time a lender allows between the transaction date and the billing date. The standard grace period is usually between 20 and 30 days. If there is no grace period, finance charges will accrue the moment a purchase is made with the credit card. People who carry a balance on their credit cards have no grace period.

Interest Rate is the price that a bank or financial institution charges a customer for borrowing money. On credit cards, interest rates are a little trickier, because lenders set multiple interest rates. For example, you may have a low, teaser (introductory) rate when you open an account, followed by a higher standard rate for purchases, which turns into a penalty rate if you pay late. So you may end up owing a balance to a credit card company with multiple interest rates. Interest rates on credit cards are expressed in a standardized way so consumers can more easily compare cards. That standard way is known as the APR, which stands for annual percentage rate.

Introductory rates – Credit cards often offer lower introductory APRs as special promotional offers. After a period of time, the rate usually returns to the standard rate. It’s important to read the terms and conditions for all credit cards to fully understand how long the introductory rate will last and what the rate will be at the end of the introductory period.

It is the below-market interest rate offered to entice customers to switch credit cards or lenders.

Issuer – an issuer (or issuing member) is a financial institution which issues credit cards such as Visa® or MasterCard®.

Late payment fee may be imposed if the minimum monthly payment is not received by the Payment Due Date. In order to avoid late fees, ensure that you pay at least the minimum amount by the due date. Late payments may affect your credit history negatively, even if your entire outstanding balance is later paid in full. Occasional late fees are capped at $25 under federal regulations.

Monthly finance charge – If your credit card balance is not paid in full, you will be charged a Monthly Finance Charge. The charge is calculated on the statement closing date by multiplying the Average Daily Balance on the account by the Monthly Finance Charge rate (the Annual Percentage Rate divided by 12).

Minimum Monthly Payment is the minimum dollar amount that must be paid each month to prevent a credit card account from being delinquent. The amount is based on the percentage of your outstanding balance or a minimum fixed amount.

The industry standard is now to calculate the minimum payment in one of two ways: either 1 percent to 5 percent of the total balance due, or, all fees and interest due that month, plus 1 percent of the principal amount owed.

Minimum finance charge – You will be charged a minimum finance charge if the calculated amount of your finance charge is less than the minimum finance charge set by your credit card company for a billing cycle. For example, your finance charge may be calculated to be $0.35 but if the company’s minimum finance charge is $0.50, you’ll pay $0.50. A minimum finance charge applies only when you must pay a finance charge — that is, when you carry over a balance from one billing cycle to the next. Not to be confused with minimum payment.

Outstanding balance is the amount you owe on your credit card. This is the balance used to calculate payments and on which interest is charged.

Over the credit limit fee is the fee that may be imposed if your outstanding balance exceeds your credit limit on the card.

Payment due date is the date when your payment must reach your bank to avoid a late payment fee (if applicable).

Penalty rate – The penalty rate, also called the default rate, is the very high interest rate charged by the credit card issuer when a borrower violates the card’s terms and conditions. The penalty rate is triggered most often when cardholders are late making monthly payments. This penalty rate can be lowered or cancelled if the account holder makes six consecutive on time payments immediately following the late payment.

Periodic Rate is the interest rate described in relation to a specific amount of time. The monthly periodic rate, for example, is the cost of credit per month; the daily periodic rate is the cost of credit per day.

Personal identification numbers (PINs) are secret numbers that customers use to access their accounts via ATMs.

Preapproved means that a potential customer has passed a preliminary credit-information screening. A credit card company can spurn the customers it invited with “pre-approved” junk mail if it doesn’t like the applicant’s credit rating.

Prime rate – Most credit cards use the “prime rate” as a base rate (e.g., “prime + 12%”). The prime rate used is taken from the Money Rates column of The Wall Street Journal. The prime rate is merely a base rate used to make loans to certain borrowers.

Principal amount – The amount borrowed (such as the face value of a debt security), or the part of the amount borrowed which remains unpaid (excluding interest), here also called principal.

Purchase rate is the interest rate charged on regular purchases put on a credit card. It differs from a cash advance rate in that it is lower because banks and issuers view regular purchases as less risky.

Returned payment fee is charged by a credit card issuer if you pay your bill with a check that bounces.

Secured credit card is a credit card that requires you to pledge collateral to receive credit. Your credit line is determined by the amount you deposit into a collateral account. It is used by people new to credit, or people trying to rebuild their poor credit ratings.

Statement credit is a credit that appears on credit card account statement. Statement credit usually is a purchase refund or a way that banks give rewards to credit-card members. It offsets existing expenses on the credit-card statement.

teaser rate – is the same as introductory rate. It is an interest rate charged to a customer during the initial stages of a loan. The rate, which can be as low as 0%, is not permanent and after it expires a normal or higher than normal rate will apply.

Total finance charge is the amount that a consumer pays for credit card borrowing. The total finance charge is calculated in several ways, most commonly by multiplying the average daily balance by the daily periodic rate by the total number of days in the billing cycle. The charge is applied to credit card bills monthly.

Unsecured credit card is a credit card that is not secured with collateral. A customer can qualify for unsecured credit based on their credit history and financial strength.

Variable Interest Rate – With variable-rate cards, your APR (annual percentage rate) can change. Usually, the rate is tied to another rate called an index. Also known as a floating rate. In the United States, most credit cards have variable rates, and most of them are pegged to one such index, the prime rate. The prime rate, in turn, moves in lock step with an interest rate set by the Federal Reserve called the federal funds rate. So if you see a headline that says “Fed raises interest rates” it means your cost of carrying a balance on your credit card likely just went up. In your credit card terms and conditions document, the variable rate is often stated as an index plus a margin. For example, your document might say your rate is “Index + 10.99 percent.” If the prime rate is your index and is at 4 percent, your card’s interest rate is 14.99 percent.

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What is a Secured Credit Card?

Secured credit cards work differently. Instead of establishing a credit limit on the basis of the applicant’s credit history, the amount that you can charge on these cards is set by how much money you deposit with the card issuer. With a secured credit card, I can deposit $500 with the card issuer and get a credit card that has a credit limit of $500. That deposit has secured my credit line, and I will be refunded that $500 deposit when I close the credit card. Until then, I can borrow against that $500 and pay in installments.

Who Should Get a Secured Credit Card?

Secured credit cards are a great option for anyone with no credit or bad credit who is working to rebuild their credit history. Since secured cards will report to the three major credit bureaus, Transunion, Equifax, and Experian, cardmembers who responsibly use secured cards and pay their debts on time can improve their credit history and credit scores with those secured credit cards.

Secured credit cards are great for young people, college students, new immigrants to the United States, and people with bad credit histories resulting from a divorce, bankruptcy, identity theft, foreclosure, or other kind of calamitous credit event. With secured credit cards, people can rebuild their credit and see their FICO scores improve by 100 points or more, as stay current with their secured credit card.

What are the Benefits of a Secured Credit Card?

One of the biggest benefits of a secured credit card is that it can help you to establish your credit history or help you in rebuilding bad credit. Filing bankruptcy, for example, can cause serious damage to your credit and lenders may not be willing to give you an unsecured card right away. Using a secured card and paying it off each month can give your credit score a boost over time. Your lender could also choose to convert you to an unsecured card once your score improves.

Secured credit cards are also a great way to control spending since they typically have very low credit limits. You can get a secured card just for emergencies and you don’t have to worry about overspending or racking up a lot of debt.

How to Compare Secured Credit Cards?

There are a lot of expensive secured credit cards that charge high application fees, member fees, and other fees. These are best avoided. Low-cost secured cards are available on the market to savvy shoppers. They can be issued through banks, local credit unions or through certain retail organizations.

When comparing secured credit cards, you need to consider where and how the card can be used, the interest and fees and how much of a deposit is required, whether the usage of the card is reported monthly to the credit reporting agencies – Experian, TransUnion or Equifax.

Read More What You Need to Know About A Secured Credit Card

Conclusions

When looking for a secured credit card to rebuild your credit history, it’s important to shop around and look carefully at the fine print. With huge fees for everything from applying for a card to keeping the card after a certain period of time, many secured cards can cost a lot of money. Fortunately there are better secured card options on the market to help you rebuild your credit history.

The post What is a Secured Credit Card and Who Should Have One? appeared first on CardBenefit.