Credit Cards
Credit cards are now becoming easier to get—and at a younger age. Learn how to responsibly choose and use a credit card.
Read the fine print. If you receive an offer for a pre-approved credit card or if someone says they'll help you get a credit card, find out the details first. You need to know what interest rate you will be paying and for how long. Some credit cards offer low rates as "teasers" that are raised after a certain period of time or only apply to balances transferred from other cards. You also need to know about any annual fees, late charges or other fees, and whether there are grace periods for payment before interest is applied. If the terms of the offer aren't provided or aren't clear, look for a credit card from someone else.
Shop around. Interest rates and other terms vary widely. There are also different types of cards, such as secured cards that require a deposit to cover any charges that are made, cards that can also be used as telephone calling cards, cards that allow you to either charge something and pay later or deduct the charge from your checking account immediately, and cards that can only be used to charge merchandise from a catalog. Make sure you know what kind of card you're being offered and what type of card meets your needs best.
Don't pay fees up front to get a credit card. Legitimate credit card issuers don't ask for money up front, unless you're applying for a secured card. If you are applying for a secured card, make sure you understand how your deposit will be used. Don't pay someone to help you get a credit card; if you have good enough credit, you can get one yourself, and if you have bad credit, no legitimate lender is likely to give you one.
Use your credit wisely. Many Americans are in debt because they have taken on more credit than they can handle or have not used credit responsibly. Don't apply for more cards than you absolutely need, and don't charge more than you can afford. To maintain a good credit rating, pay bills promptly. Avoid interest charges by choosing a card that offers a grace period and paying the entire balance due each monthly. If you can't pay the full balance, choose a card with the lowest interest rate.
Get help if you feel you're in over your head. Ask your credit union for assistance. For additional help, visit the National Foundation for Credit Counseling’s Web site.
This article was submitted by the National Fraud Information Center, a program of the National Consumers League that assists consumers with recognizing and filing complaints about telemarketing and Internet fraud. Submission of this article does not imply an endorsement or recommendation of the Financial Resource Center site.
Seven Things to Know Before Using a Debit Card
Debit cards are revolutionizing the way Americans pay for goods and services. With a debit card, you don’t have to carry as much cash. You also limit the need to write checks, show identification, and wait for approval. What’s more, debit cards are more readily accepted than checks, especially when you’re traveling away from home.
According to the Michigan Association of Certified Public Accountants, there are two basic types of debit cards:
- Automated Teller Machine (ATM) card — This card is used to obtain cash from ATMs and is accepted for payment by using your Personal Identification Number (PIN) at certain supermarkets, retailers, and gas stations.
- A card that carries the logo of one of the two major payment card companies, Visa and MasterCard — This card can be used to withdraw cash from an ATM, as well as to make purchases anywhere the logos on these cards are accepted.
- A debit card may look like a credit card, but it works like the electronic equivalent of a check. When you pay with a debit card, you authorize the credit union to take money directly out of your checking account and pay it to the merchant. Like a credit card, you simply sign a receipt for your purchase. Unlike a credit card, there is no bill at the end of the month and no interest charge. The debit simply shows up on your checking account.
- Debit card deductions are instantaneous. Debit card purchases are immediately deducted from your account, which means that your spending is limited by the balance in your account. Be aware that if you have written checks that have not yet cleared, your debit card may allow you to overdraw your account.
- It is important to notify your card issuer immediately if your debit card is lost or stolen. It’s true that, under federal law, there is a higher liability for debit cards, but, in response to consumer concerns about liability for fraudulent use, Visa and MasterCard have instituted a zero liability policy. In the event of unauthorized use of a US-issued debit card with the Visa or MasterCard logo, you are not held responsible for fraudulent purchases. The zero liability policy applies to purchases made using your card or account information at a store, over the phone, or on the Internet. It does not, however, apply to ATM transactions.
- A debit card can help track spending. Because debit card purchases are listed on your monthly statement, using your debit card makes it easier for you to track your spending and eliminates the need to try to remember where you spent the money you withdrew from the ATM. Also, if you’re banking online, many personal finance software programs download debit transactions to your software, where you can assign them to the proper spending categories.
- Debit cards do not provide the same purchase protection as credit cards. In most cases, if you have a problem with merchandise or services you charged to a credit card and you have made a good faith attempt to work out the problem with the seller, the law allows you to withhold payment for the purchase plus any finance or related charges. Federal regulations make no such allowance for debit card purchases (although some financial institutions might). Typically, you’re out the money that has been deducted from your account until the issue is resolved.
- Some financial institutions charge for debit transactions. While you won’t accrue interest or finance charges on debit card purchases, some institutions charge a monthly or per-transaction fee for debit cards. Shop around for the best deal, particularly if you plan to use your card often.
- Debit cards can make balancing your checkbook a challenge. It’s easy to use your debit card to pay for groceries and stuff the receipt in the bag without ever deducting the amount of your purchase from your checkbook balance. To avoid overdrawing your account, devise a system for recording your debit card transactions.
You seek the expertise of CPAs at tax and audit time, of course. But CPAs also promote personal and professional financial security year round. Visit the CPA Referral Service on the MACPA Web site to search for a CPA in your geographical area or specific area of expertise. This article was submitted by the Michigan Association of CPAs.
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