Of course a very important component of the difference here is that credit card companies will charge interest for the privilege of paying at your convenience.

Charge cards were established in 1914, by Western Union (printed on paper), although a very early concept of consumers using a card for purchases dates back to 1887 by Edward Bellamy in his novel Looking Backward, where he uses the term “credit card” a number of times.

In 1957, Frank McNamara, invented the first official charge card, which he called Diners Club. In 1959, American Express was the first company to issue embossed plastic charge cards.

In comparison to charge cards, there is good and bad about credit cards. One the one hand, users can buy things today that they really cannot afford (which would be most beneficial in an emergency). However, what they are actually doing is increasing the cost of the purchase by paying over time, which can be come a significant burden to one’s personal finances.

Without the urgency of unexpected financial emergencies, many people use credit cards responsibly. However, regardless of whether a loss of a job, or a medical emergency, or plain old financial irresponsibility results in a credit card user getting buried in debt, through increased interest rates and ongoing extra fees, the effects are the same: Great stress and aggravation in life.

HOW TO GET OUT OF DEBT

There are solutions to reducing your debt and a number of options are available to you – without bankruptcy. However, each option should be weighed against their advantages and disadvantages.

Get the facts and find out for yourself how you can dramatically reduce your credit card debt. Speak with a professional debt counselor to find out what’s best for you.

There is no cost and no obligation for this service. A professional debt counselor will help you understand your options on getting out of debt.

Click “Contact EFS” for an immediate consultation, or enter your name and email below for more information.

Stated another way, a debit card is just like a checking account, except you don’t need to manually write out the checks.

Conversely, every time you buy anything with a credit card, it’s as if you just took out a loan to make that purchase, which, of course, you will then have to repay. And for most consumers, they will be repaying that loan with interest.

In other words, a debit card uses money you already have and a credit card uses money that you don’t have.

Credit or Debit?

If you are accustomed to making purchases with a credit card, you are also very familiar with providing your signature, and/or picture ID, as part of the process for many purchases. When using a credit card, you will “not” be asked “Credit of Debit?,” along with being asked your preference between a plastic bag or paper bag, at your local grocery store.

You will only be offered that choice when using a debit card that is directly linked to your checking account. In which case, the transaction could be processed as a credit or debit purchase, and you may be offered the choice.

So, when your grocery cashier asks you “credit or debit?” the difference is more important than your answer for the next question of “paper or plastic?”

If you answer “credit”, then no money will be taken from your bank account, and the purchase will be just like using a credit card. If you answer “debit”, then the amount of money for your grocery purchase will be removed from your bank account.

Also, if you answer “debit” then you will usually need to enter your personal identification number (PIN) to complete the transaction.

Which is Better?

If you are able to respect that using credit cards is like taking out a small loan every time you make a purchase with one, and that you will be paying interest on your purchase if you don’t pay it back within the required time (usually 30 days or less), then credit cards can be a very handy way to handle money.

On the other hand, if you use a debit card, you are simply spending money that you already have, and therefor do not need to be concerned about having to pay interest for making purchases.

In other words, one is not inherently better than the other. It’s really a matter of your own understanding, responsibility and discipline that controls how one card may be better than the other.

Too Much Credit Card Debt?

Having said that, if you have gotten yourself deep in debt and it’s having a bad effect on your life, you should consult with a professional debt negotiation firm to get the facts about getting out of debt. A professional debt negotiation service has the ability to work on your behalf to significantly reduce your credit card bills, without filing bankruptcy.

Want to find out more?

Click “Contact EFS” for a no cost consultation to find out for yourself how to get your existing credit card debt dramatically reduced. ]]> http://effectivefinancial.com/credit-card-debit-card-difference/1101/feed/ 0 http://effectivefinancial.com/credit-card-fees/1088/ http://effectivefinancial.com/credit-card-fees/1088/#comments Fri, 07 Aug 2009 02:16:31 +0000 admin http://effectivefinancial.com/?p=1088 TIRED OF CREDIT CARD FEES?  Well, look out, because more are coming your way.  USA Today reports a variety of ways that credit card companies are attempting to quietly integrate more fees for you and I to pay all for the privilege of using “their” credit cards. “Annual Fees” are making a comeback. If you travel out of the country, you may start seeing a surcharge for international purchases.

Some companies want to charge you if you “don’t” use your card (inactivity fee).

“Analysts say that because most provisions don’t take effect until February 2010, issuers are finding ways now to bolster their income despite consumers’ precarious financial situations.”

Now, more than ever, you want to pay close attention to what your credit card issuers are charging you.

Click the following link to read the entire USA Today article, Credit card issuers pile on new fees

By the way, if you are over your head in debt, and would like to dramatically reduce your current credit card bills, consult with a professional debt negotiation service to find out for yourself how all these fees can be negotiated away, as well as a chunk of the original principal, too.

Find out now, by clicking “Contact EFS” and get the facts, through a no cost consultation.

A purchase made via an actual credit card does not use any of the purchaser’s own money. That is paid back later, and for most credit card users, it’s paid back with interest.

However, such cards that are prepaid are using money that is already set aside. These plastic cards look like regular credit cards with Visa and MasterCard logos. Since they work just as easily and in the same ways as regular credit cards the term “prepaid credit card” is used merely as a reference of familiarity, rather than a factual depiction.

With prepaid credit cards there is no interest charged but there is probably a purchasing fee plus monthly fees added to the billing.  (Which means they are more expensive than the gift cards referenced above.)

These prepaid cards offer a way for parents to allow limited purchases for their teenage children, without either parent needing to be present to complete the transaction.

These types of cards may offer certain conveniences, but they are not a cost-effective way to handle money.

Furthermore, Ellen Cannon, Bankrate’s managing editor, states that the use of the term “universal default” is an example of credit cards saying one thing and doing another. “Universal default generally means that card issuers can look at a consumer’s overall credit profile and change the terms as they see fit. Most issuers say that they don’t practice universal default. ‘But they tell consumers they change things ‘because of market conditions,’ Cannon says. ‘It’s practically the same thing.’”

Which is why analysts believe the credit card companies are expected to make big profits in spite of the regulations.  The card companies will continue to take advantage of consumers while keeping a large percentage of the world’s population trapped in the never-ending debt cycle.

Click here to read the Wall Street Journal article on their blog.

“The credit card industry will continue to provide one of the most lucrative returns of the asset classes within banks’ portfolios even after new U.S. credit card rules are put in place…”

For more details, here is a link to the Reuters article, Credit card industry to remain lucrative: study.

Further, in spite of the fact that talk about reigning in the credit card industry from the Obama administration has been loud and clear, “Stocks of credit card issuing companies have risen about 150 percent in the second quarter and have outperformed the industry, despite challenges….”

Stated another way, the players know the real truth, that regardless of whatever public relations spin is promoted about making credit card companies more friendly to consumers, they will still be making a fortune from those very same credit card holders that are getting abused by high interest rates and oppressive fees. In short, taking advantage of consumers is a living goldmine for the credit card companies and regardless of what you and I hear otherwise, credit card companies will continue to devote the might of their resources towards keeping consumers enslaved by debt and keeping the credit card company coffers filled with gold.

Some experts say the profitability of credit cards really began twenty-five years ago, when the banking industry successfully eliminated a critical restriction: the limit on the interest rate a lender can charge a borrower. Deregulation, coupled with a revolution in technology that enables the almost real-time tracking of personal financial information and the emergence of nationwide banking, has facilitated the widening availability of credit cards across the economic spectrum

You can also click the following link for the PBS FRONLINE UPDATE:  Credit Cards, Consumer Debt and Bankruptcy.

You may also want to read this related article from The New York Times entitled, THE PLASTIC TRAP: Soaring Interest Compounds Credit Card Pain for Millions.

Did the bank take into account the fact that they were customers for 25 years and that they had an excellent payment history?

Naa.  The bank instantly increased the interest rate of the credit cards and pretended to give sympathy.

Sometimes the bank will seem to reach out and help if you run into financial trouble.  They will lower your interest rates and lower your payment.

But, the key thing to look at when you have your credit card bill is how much of your payment is going to the principle. What I’ve seen done is that when the interest rate is lowered, so is the monthly payment but the actual percentage of money going to the principle is the same as it was before they lowered the interest rate.

So, take a look at the percentage of the payment going to the principle of your debt.

You can have lower payments without changing the percentage of that payment going to the principle even though the interest rates are lower.

See, the banks watch out for themselves.  They are out to make a buck and will gladly use smoke a mirrors to make you think otherwise

That means that debt to buy stuff for the house, or yourself, would not be good debt if it doesn’t help you get out your products. For a business, debt in order to get nicer furniture or better desks would be bad debt if it didn’t help to get out more product to the market place.

PAYING  YOUR CREDIT CARD DEBT

We are facing serious pay cuts and this is going to cut into your ability to pay your debt.  What do you do?

Well, you do what everyone else does – make your house or apartment payments and living expense, pay your car,  if there is anything left over then pay your credit cards.

See, the responsibility for the $2.3 trillion of consumer debt includes those companies that put you into debt as well as you who took out the debt. The credit card companies and banks know what they were doing when they put you into debt.  They knew the consequences of making sure you were buried in debt.

But, the ultimate responsibility is yours, because you didn’t have to take out those credit cards and use them.  Now, you may be using them just to live and of course that buries you even deeper.

THE SECRET HISTORY OF THE CREDIT CARD

Here is an excellent show from PBS Broadcast titled, The Secret History of the Credit Card.  Click on this and watch this show.  It won an Emmy for investigative reporting. http://www.pbs.org/wgbh/pages/frontline/shows/credit/view/

It’s not the end of the world if you can’t pay your credit card bills.  We can help you find out how to make it through troubled times with your creditors.  Call us for a free consultation – (866) 998 – 5551.

And, don’t forget to watch the PBS Frontline Special Report, The Secret History of the Credit Card.  You’ll be amazed.

Want to see something really scary? Are you really ready for this?

I mean, you have to have slept well and eaten enough before you see this so you are really prepared. 

CREDIT CARD STATEMENT

Here it is – read your credit card statement!

Most people just look at the amount they owe for the month and just pay that, or not.

What is really interesting is all of the fees that go on the bill even if you aren’t late on your payment.

Pull one of your credit card statements out and take a look.

You will see how much of your payment goes to the principle (the amount you owe) and how much goes to the interest on the credit card.

Now get this, I have seen a credit card payment where the interest rates were so high that all of the monthly payment went to interest only AND the person was still $2 short of paying all the interest that had been put on the card for that month!

HOW TO LOOK AT YOUR STATEMENT

When you look at your statement, you will see a “Finance Charge”. That’s the interest rate that you pay that month.

On a payment of $110.00, you might see a finance charge of $73.00. That means, out of the $110.00 you paid that month, only $37 goes to the principle of the debt. The rest is interest charges.

Scary, isn’t it!