Sunday, December 7, 2014

Online Credit Cards 101


Welcome to my blog on "Online Credit Cards 101".  I have tried my best to collect all the Credit Card related information with respect to how credit card industry works, and how consumers are impacted with high or low credit scores. This blog also provides information on credit cards, type of Credits, Credit requirements, Credit score and the Credit counseling available from non-profit and government agencies. Lastly information available on major credit card companies such as VISA, MasterCard, Discover and American Express. 

I will be reviewing following topics for Online Credit Cards  

  • What are Credit Cards?  
  • How does Credit Card work?  
  • How do credit card companies approve card applications?
  • What is Credit Score?  
  • Credit Card Types  
  • Credit requirements  
  • Credit Card Pros and Cons  
  • How to get Credit Cards Online  
  • How to manage Credit Cards  
  • How Credit Card companies make money  
  • How Credit Card Balance is calculated  
  • What is PCI rule for Credit cards  

What is credit card?

The Credit card is the term used for plastic cards issued by credit lenders(Banks, Financial companies, Retailers etc.) to card users (Customers). In essence a credit card is way to pay for your purchases to the merchants without actually paying them in cash or checks. It is a payment process in which your credit card issuer pays the payment to merchant wherever you do the purchasing. This is done against the promise to pay same shopping amount plus any interest applied on purchasing amount to the Credit Card Company. Basically you get the grace period of credit card billing normally 30 days to pay the owed amount back to the card issuer. This is great way to save yourself from carrying a large amount of money with you for big ticketed items.





How does a credit card works


The Credit cards are issued by credit card companies or financial companies after they approve each applicant for the credit amount. The mode of application can be written application or company sent application forms. The other modes of applying credit cards are through phone or online application, which is the choice of million card users. Once application is approved the card issuer company will send you a small plastic card with your own account number printed on it. The other details on the credit card are its expiry dates, verification code, customer support number, logo and your full name.



Read more on Credit Card, how it works and what involves in completing a Credit Card transaction. More on PCI security standards for ensuring how merchants store, process and remit payment transaction. -  << Read more >>

How do Credit Card companies approve Credit Card applications?

Now the question is how do they approve or disapprove credit card to millions of card users. How do they trust each account holder is credit worthy and will pay money on time. In order to understand how Credit Company approves or disapproves your credit card application is to know  first about credit score.


This is a mathematical formula developed by Fair Isaac Corporation to derive a score based on various parameters about a credit card applicant. The more credit score is high one has greater chance in getting credit card. The credit score formula is extensively used in western and some advance Asian countries to determine the credit worthiness of a applicant.



Read more on online Credit card application process and how instant approval is obtained, if you have great credit score. < < Read More >>


What is credit score?

Now we know credit score is developed by Fair Isaac and this score is used by all the credit reporting organizations to rank your credit ranking against credit score. First, let see what are important factors, which are key to your credit score? When credit card companies are evaluating your application they look for following information against your name.
  • Payment History: How you have been paying your bills in past.
  • Amount Owed: How much you already owe to lenders.
  • Length of credit history: The more you have positive credit history the more it adds weight to your credit score.
  • Type of credit: If you own home or big credit such as car or personal loan which you are paying timely back to lender also shows your credit worthiness. Taking loan for home, car and college may be necessity but other then these three piling loan is bad way fo building credit history
  • New Credit: This shows lender’s confidence in you and are offering credit to you against your good credit history. But opening too many credit cards also goes against you especially if they are being used for piling debt. Keeping unused credit is good for credit score.
  • Blemish Record: Any negative remarks on your credit report will bring your credit score down.

Read more on why do we need good credit score to get a good Credit Card - Read More


Credit Card Types



Whatever you need, the Credit card companies have every type of credit card. They issue personal, business, travel, student, and merchant cards. Basically they cater to every type of demographic population and credit incentives accordingly offered to consumers.

Personal Cards:- "Credit issuing companies allow you to pay with a Prepaid card, Debit card, or spend now and pay later with a credit card."
  • Prepaid Cards:- "A prepaid card is not a credit card even though it looks like any normal credit card with a card account number, magnetic stipe on back of the card , signature stripe and customer contact information.
    This is also first step towards building your credit history. Prepaid cards are choice for students with no credit history, or people with bad credit history. One should be educated on fees associated with prepaid cards. Issuing banks charge various types of prepaid fees such as "activation fee", "declined transaction fee", "Overdraft fee" etc. In addition to these fees banks also charge maintenance charges, which is either billed monthly or yearly.
    It's your money, take it wherever you want and wherever you want to spend. You can pay bills, shop online, transfer money or have your paycheck deposited to your prepaid card.

  • Debit Cards:- Credit company issued Debit card is just like your cash, check or check card. You have ease to carry and shop online at retailers small or big. By using debit card you also get rewards from credit card companies. You have funds available 24/7, and companies monitor your account 24/7 for fraud and theft. Again this also helps in building your credit history and credit score.

  • Credit Cards:- Beauty of credit cards is spend now and pay after grace periods, normally 30 days. The catch is if you fall on your payments the credit card companies will start charging you higher late fees and soon your small loan will turn into a unmanageable big loan


Business Cards:- The Business Credit Cards fall into two categories. First is "Individual payment cards" and second is "Company payment cards". In both cases employee doesn't pay it from pocket but is directly or indirectly reimbursed by company.

  • Individual Corporate Credit Card:- The company issues an individual corporate credit cards for company related expenses. In this type of card employee will directly pay back to card issuer company. Employee can later bill its employer for payments by submitting the expenses reports and proof of payments made to credit card company.

  • Corporate Credit Card:- This card is given to employee for company related expenses and in this case company picks the tab for employee. The personal expenses are still the responsibility of employee to pay either directly to credit card company or paying back to employer.


Retail Credit Cards:- The Retail credit cards issues by big retailers such as Amazon, Macys, Wal-Mart etc. The idea behind issuing these credit cards to consumers to lure them to stores with less background check and giving perks like reward points which can be used against future purchases.




Small Business Credit Cards:- Idea for small business which plan to use credit for short amount of period and pay back in easy terms. Credit card companies provide options for small business owners with credit card with low APR or low interest rates. This is needed to attract small business owners so that they borrow large amount of money from them. A big loan will translate to big credit card fees for lenders.


More information on Credit card types and current credit card offering from major credit card companies. Read more.


Credit Card Requirements

  • Your age:- First you should be over the age of minimum 18 years old. This ensures you are not minor and secondly by this point you are legally allowed to work.




  • Steady Income:- Before credit card company make decision on your application, they will check your work profile to ensure you will be able to pay back credit card bills.



  • Credit History:- In case you are minor you will not have any credit history, you will require to piggy back on your parents credit card account as associate card holder. For others Credit card companies will check your back ground to see how trusty and creditworthy are you. They will check your past bill payment records for apartment, utility, retail accounts etc.




  • Residential record:- In some cases they require proof of residence, This lets them verify other background checks in that area such as utility , bank, bills and apartment rent payments.

  • Credit Card Pros


    You must have heard of proverb ' excess use of anything is bad', same is true for Credit Cards. As long used with common sense , it is a great tool to shop and get credit grace days to pay back to lender. With no control over spending and total disregard to credit card due dates and fees/penalties, will quickly turn a debt into a nightmare.


    • Carrying $10,000 dollars with you all the time is better or carrying a credit card with $10,000 credit - you decide
    • Acts as savior during Financial emergency
    • Helps in building credit score. The Credit score is used in evaluating the person's creditworthiness. The higher credit score the higher chances you have in getting the good credit card deals.
    • Ability to pay big ticket items and pay them in small monthly installments.
    • Some Credit card companies reward you with hotel/vacation deals, travel or cash back deals, as long you use there Credit card for purchases.
    • Unless you are good at tracking your expenses, the credit cards help you in understanding the expenses, where are you spending and how much.
    • Moreover when travelling overseas you don't have to worry about the currency exchange as Credit cards are accepted universally.

    Credit Card Cons


    • Mindless spending can lead a consumer to deep debt and finally to bankruptcies.
    • Any missed payments and unpaid fees ruin your credit score.
    • Just by having available credit through various credit cards, consumers can get tempted into transferring balance from one card to other card and thus accumulating more debt.
    • Credit cards companies charge higher interest on consumers, in such case even a small amount will turn into a big loan.


    How to get Credit Cards Online

    Applying Credit Cards online is easy and you get decision in few minutes. However before you apply you should check credit card requirements as lot will dictate by those parameters.


    How to manage Credit Cards

    Managing credit cards is easy as long you play by the book. Having credit is good but spending every dime of credit is bad. Not paying on time is worst and can lead you to debt nightmare.

    • Paying Credit Card bills on time:- Consumers who pay bills on time are rewarded by credit companies in terms of chargeback, points, and low APR.


    • Add more money to minimum due amount:- If you pay just minimum payment for credit card bill it will take you years to get rid of loan. Adding more money to minimum pay will help you get rid of credit card debt in short amount of time.


    • Watch for Fees/APR/Interest charges:- Read carefully fine prints about APR, Credit Card fees, late payment charges and due dates etc.


    • Avoid taking cash advance or using checks:- These options are traps. Remember cash withdrawn over credit cards comes with higher interest charges. If not paid quickly will lead to higher balance in no time.

    How Credit Card companies make money

    Credit Card companies are making billions of dollars every year and all this is being charged to individuals, small business owners and corporate companies.

    • Interest fees:- Every month millions off consumers pay interest fees because they are not able to pay owed amount within the grace period. Same goes true for small business owners.


    • Various Fees:- Apart from Interest fees, credit card companies charge late fees, Balance transfer fees, annual fee for maintaining account. Some even charge currency conversion fees



    What are credit reports?

    What is credit report? Well it is just a report designed by credit reporting agencies, which tells about you and your credit rating. This report helps lender in making decision about your credit application.


    This is your credit worthiness report card which has all the details on it for lenders to review. Each bank or financial lender relies on these credit reports to make decision on credit applications.


    Each time you make big purchases, pay bills or make late payments or change jobs, everything gets reported to these credit reporting agencies. Once your file is opened they start accumulating information about you.


    They keep track of your personal information, professional information such as job history. All your past addresses and the loan taken from  financial institutions is recorded in report. How much you pay and how much you owe to lenders. Any negative remarks such as missed payments, any personal or business disputes are reported and documented in your credit report.


    These information acts as parameters to derive your credit score. Too much credit used, missed payments and negative remarks lower your credit score. Whereas bills paid on time, high credit available, and long positive credit history elevates your credit score.



    There are three credit reporting companies which keep tab on consumers and document all their history in credit reports.



    Credit Reporting Agencies


    How to contact credit reporting companies



    • Trans Union - Consumer Disclosure Center
    • Address: P.O. Box 1000
    • City: Chester, PA 19022
    • Trans Union Web Address
    • Contact Number: (800) 916-8800 or (800) 888-4213

    • Equifax
    • Address: P.O. Box 105873
    • City: Atlanta, GA 30348
    • Equifax Web Address
    • Phone Number: (800) 685-1111

    • Experian (formerly TRW)
    • Address: P.O. Box 2104
    • City: Allen, TX 75013-2104
    • Experian Web Address
    • Phone Number: (888) 397-3742


    Credit Card type deals 




    Credit cards come with variety of card types designed to each situation and population type. The most common and popular credit cards are:

    • Low Interest Credit Cards
    • 0 % Apr Credit Cards
    • Instant Approval Cards
    • Reward Credit Cards
    • Balance Transfer Cards
    • prepaid and debit cards
    • Student Credit Cards
    • Retail Credit Cards




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