Friday, November 18, 2011

Understanding the Credit Card Industry

You are eligible to apply for a credit card if you are 18 years of age and have a standard source of income. In countries like US, the lenders ask the credit bureau for your credit report and run a check through your credit profile to check if you have outstanding bills, loans or mortgage on your account. They make their credit decision after going through your credit file.

In countries like US, a consumer is considered to be low-risk if he or she lives in their own home and/or are in a profession for at least two years. Such a person attracts a low rate of interest for his credit card. A person who has outstanding dues to pay or does not have a fixed source of income may be eligible for a credit card but at a high rate of interest.

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However the scenario is different in India, an upcoming economic superpower in Asia. Indian banks have been charging equal rates of interest for credit cardholders regardless of the payment history, economic status or credit profile. However the application of 'different' rates of interest based on credit history and source of income is gaining ground in India. In future, it looks that the provisions for application of interest on credit cards will be the same as in US. The average rate of interest on a credit card in the US is 13-14 percent per annum while in India, it is 33-34 percent.

What the card holder should know

According to the Truth in Lending Disclosure, (TILA) implemented by Federal Reserve (US) in 1988, it is important for consumers to know the cost and terms of credit. This means that the information in a credit card agreement should be in a comprehensible, easy to read and easy to compare manner so that consumers can make an informed decision.

It is important for the consumer to go through the terms and conditions of the credit. He or she should also find out the annual fees of the card and do a comparative analysis. There are some credit companies that charge annual fees and there are others that do not.

Every credit card company gives value added features like Billing Dispute Resolution, Purchase Protection, Extended Warranty, Fraud Early Warning, Accident Insurance, and Insurance of loss of luggage and many other features. There are even issuers that provide credit for low promotional rates or even zero percent interest rate. The idea is to promote the card and make the card holder make good use of the card. Till the time of promotion, the credit card holder has to pay meager or no interest on the outstanding balances.

How you can use it to your advantage?

If you are quick on your payments and do not exceed the credit limit, you can call the credit card customer service wing and negotiate for a lower interest rate. If you've been a good credit history and relationship with the company, they will definitely oblige.

You can also call up the company and ask for a late fee waiver. In case, you are incorrectly charged, you can also get credit as a good will gesture. You can also ask for a credit line increase. Not to mention benefits like value added features, insurance protection, merchandise dispute protection and cash back offers. However all of these are marketing tactics for you to buy the plastic money and use it. However it is important to use it sensibly. Financial experts state that your credit payments should not exceed 15 percent of your net take-home salary.

Now you do not need to wait in line,for days on end, for your credit card application, to be approved. You can apply for it online too. Some of the best deals in online credit cards are available with major players like:

Please note that the brands given below are all exceptional and popular in their own right. The brands given below are not ranked in order of importance.As a prospective customer, you can click on the links and make a cost-comparative evaluation to decide which one offers the best terms of credit that is tailored to your interest. The listings of these brands is just to make your life simple and make it easy for y0u to check, compare and apply for credit card online from one place rather than go to different websites.

Understanding the Credit Card Industry

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