Credit Cards Latest Info

Many people don’t know much about credit cards beyond the fact that they let you buy things now and pay for them later. That is just the tip of the iceberg. If that’s all you know about credit cards when you first start using them, you’re already on the road to financial disaster.

Ideally you’d learn about credit cards before you ever got your first one. That way you’re prepared to use a credit card the right way. But, even you’ve been using credit card for years, it’s never too late to get some vital education on what credit cards really are and how you should (and shouldn’t) be using them.

What You Need to Know About Credit Cards

Credit Card Knowledge. Every person that uses credit cards should have a basic understanding of how credit cards work. That means knowing critical credit card terms, common credit card fees, and the right way to use a credit card. Learn all that and more in Credit Cards 101. Once you understand the basics of credit cards, it will make picking the right credit card much easier.

Improve Credit Score. Credit cards play a big part in your credit score – the number that many lenders and other businesses use to make decisions about you. Your credit score is based on the information in your credit report – a compilation of all your credit card and other credit-based account. Find out what you need to know about credit reports and scores.

Credit Card Debt. Overusing your credit cards can lead to an issue that many Americans face today – credit card debt. As you buy things with your credit card, you may not realize you’re racking up credit card debt until your payments suddenly become unaffordable. Credit Card Debt 101 can help you deal with and pay off your credit card debt.

Learn to Understand Your Credit Cards

The biggest problem for credit card users is that they don’t understand their credit cards. It’s no surprise that cardholders are confused by their credit card terms since card agreements are so complex. Some credit card agreements have so many pages that they’re more like manuals.

Understanding your credit card is key to being able to use your credit cards correctly. The 8 Most Important Credit Card Terms will help you understand some of the most commonly used credit card phrases, like “annual percentage rate” and “finance charge.”

Thinking about closing a credit card you’ve grown annoyed with or one that you’ve paid off? The Best Way to Cancel a Credit Card might change your mind. Find out how closing a credit card today can hurt your ability to borrow tomorrow.

Your goal is to use your credit card for free. Your credit card company’s goal is to get you to pay as much as possible. If you know the credit card fees to watch out for you can avoid most, if not all, surprise fees your credit card issuer tries to charge.

Credit card companies also make loads of money when you make minimum payments. Learn how minimum-only payments can more than double the cost of your credit card.

Why Use Credit Cards Anyway?

If you use them correctly, credit cards can help you. For example, if you make a purchase and pay off the balance by the due date, you’ve used your credit card to get an interest-free loan. A similar loan from a payday advance store would cost up to $100. Credit cards can also help you build a good credit score, which is necessary if you want to get approved for a mortgage or auto loan in the future.

Credit card usage can quickly and easily go wrong. There are serious and long-lasting consequences to using your credit card irresponsibly. Charging too much on your credit card can lead to debt and late payments. Too much credit card debt can damage your credit score, which, in turn, can keep you from getting a house, a car, a good insurance rate, or even a job.

Read Advantages and Disadvantages of Credit Cards to get a better idea of how a credit card can work for you or against you.

Dealing With Credit Card Debt

You may be wondering how to deal with a large amount of credit card debt or why you should pay off credit card debt in the first place. You can handle credit card debt on your own, or you might consider using a consumer credit counseling agency to help lower your monthly debt payments and create a debt management plan.

Not all businesses that promise to help you with your debt actually do that. Credit card debt settlement companies are one of these types of businesses. Get the facts on debt settlement before you waste your money and hurt your credit.

If you’re starting with a clean slate, you have the perfect opportunity to avoid credit card debt. By using your credit card wisely – charging what you can afford and paying your bill in full – you can live your life credit card debt-free.

Get Started Learning About Credit Cards

What you need to learn about credit cards is right here. Get started with Credit Card 101 and work your way through the articles. By taking the time to learn about credit cards, you’ve taken the first step to get control of your credit.

Credit Creation and Limitations of a Bank

Credit creation is one of the important functions of a commercial bank.It constitutes the major component of money supply in the economy commercial banks differs from other financial institutions in this aspect. Other financial institutions transfer money from the lenders to the borrowers. Commercial banks while performing the same function, they create credit or bank money also. Professor Sayers says, "Banks are not merely purveyors of money, but in an important sense, they are the manufacturers of money".

The process of credit creation occurs when banks accepts deposits and provide loans and advances. When the customer deposit money with the bank, they are called primary deposits. This money will not be withdrawn immediately by them. Hence banks keeps a certain amount of deposits as reserves which is known as cash reserve ratio and provide the balance amount as loans and advances. Thus, every deposit creates a loan. Commercial banks give loans and advances against some security to the public. But the bank does not give the loan amount directly. It open an account in the name of the borrower and deposits the amount in that account. Thus, every loan creates a deposit. The loan amount can be withdrawn by means of checks. They create a deposits while lending money also. These deposits created by banks with the help of primary deposits are called derivative deposits.

Customers use these loans to make payments. While paying they issue a checks against these deposits. The person who receives the checks, deposit it in another bank. For that bank, this will be the primary deposit. A part of the deposit will be kept as a reserve and the balance will be used for giving loans and advances. This process is repeated by other banks. When all the banks involve in this process, it is called Multiple Credit Creation.

This can be explained with an example. Suppose, if a person deposits Rs. 1,000/- in a bank. Rs.1000/- is the primary deposit. The minimum cash reserves ratio is 10% to meet the demand of its depositors. Now the bank can lend out Rs.900/-

i.e. Primary deposit - Cash reserve = Derivative deposit.
Rs.1,000 - Rs.100 = Rs.900 (10% of 1000 is Rs.100)

The bank will give the amount to his creditor only in his account which is opened in his name. The borrower can deposit the amount with the bank. The bank can lend out Rs.810/- out of Rs.900/-, which has come back to the bank in the second round as primary deposits. This process will continue and if there is no cash leakage the credit creation would be processed as in the below figure:

This process can be explained with a formula.
Total credit created = Original deposit x Credit multiplier co-efficient.

Credit multiplier co-efficient = 1/CRR x 1/10% = 1/_10/100 = 10

Total Credit created = 1000 x 10 = 10000

If CRR rises to 20%, the credit created will be _1/20/100 = 100/20 = 5

So 1000 x 5 = Rs.5000/-

It is clear, that the amount of credit created depends upon the cash reserve ratio. Higher the CRR, lesserwillbe the credit created and vice verse.

Limitations:

• Credit creation depends upon the amount of deposits.
• There exists an inverse relation between credit creation and cash reserve ratio. During inflation the CRR will be high to reduce credit.
• Banking habits of the people are well developed, it will lead to expansion of credit.
• Loans are sanctioned by banks against some security. If enough securities are available, then credit creation will be more and vice versa.
• If all the commercial banks, follows a uniform policy regarding CRR, this credit creation would be smooth.
• If the liquidity preference of the people is high, the credit creation will be less and vice versa.
• If business conditions are bright then demand for credit will be more.
• Customers should be willing to borrow from the banks to facilitates credit creation.
• Credit control policy of the Central Bank, for example during the depression, the RBI encourages the commercial banks to expand credit.