Credit Cards The Basics and How to Transfer Balances if your Rates are Too High

Credit cards are so much a part of our culture in the 21st century that people don’t even stop anymore to think about just what a credit card is and how it works. But as with all financial choices, not knowing the details of your investment can really hurt you in the end. It’s best to know as much about the basics of credit cards as possible.




Credit cards are essentially short-term loans. The company loans you the money to make your purchase, and you pay it back monthly with interest added. This interest charge on your purchases is how the company makes money, and it is higher for credit cards than it would be for a bank loan of the same name. This is understandable, since credit cards are considerably more convenient than obtaining a bank loan for the same amount. You do not have to pay the entire balance every month; you only have to pay a minimum payment. In fact, the longer your balance revolves, or carries over from month to month, the higher interest you pay to credit card issuer, and the more money they make. 
 
A savvy consumer can use the credit card system against itself to make it work for him or her. For example, you don’t have to stick with one credit card.  If you get an offer for a credit card with a lower interest rate, you can transfer your balance from one of your cards—or all of them—to this credit card with a lower rate. The new credit card will pay off your old one, and then you’ll pay the new company…but with a significantly lower interest rate. You can save huge amounts of money by transferring your balance from one credit card to another. You benefit by saving money, and the credit card company benefits by gaining a customer. 
 
Credit cards are a convenience, especially in this era of internet shopping, but they can also pose a threat to your credit and your financial stability if they are used irresponsibly. If you are disciplined in your spending habits, pay your bills every month, and know how the system can work for you, a credit card can be a very helpful way to buy the things you need.
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