The Answer Sheet: Credit Cards

Your credit card is tied to a credit account — which is a borrowing tool and a form of debt. But unlike an installment loan, a credit card is a form of revolving credit. This means that instead of borrowing all the money at once like you do with a regular loan, you borrow as you spend with a credit card. You can pay your balance in full each month or make a minimum payment (or another amount) on the outstanding balance, which will result in interest charges for the unpaid balance.

Debit cards and credit cards are accepted at many of the same places. The basic difference between a debit card and a credit card account is where the card pulls the money. A debit card takes it directly from your banking account quickly and a credit card charges it to your line of credit. At the end of the month, you will receive a statement with all your credit card charges for the month and then you may pay them at that point.

Follow these steps if you find an unauthorized charge on your account:

1. Contact your financial institution.
2. Contact the vendor.
3. Dispute the charge with your bank or credit card company.
4. File a fraud or police report.
5. Switch your bank drafts to a new account or card.
6. Monitor your account and credit closely.

Your credit card company wants to continue to make money off your account, so generally, they will not bring your interest rate down to zero. However, they want to prevent you from transferring all your debt to a lower interest credit card, so they may consider decreasing your interest rate if you ask.

There can be several legitimate reasons for a declined credit card. They may include:

1. You’ve made a suspicious purchase. Credit card companies are getting sophisticated at recognizing a purchase not usually made by the customer. This protects both you and them from fraud.
2. You’ve reached your credit limit.
3. Your card has been blocked by a hotel or rental car company. Hotels and rental car companies frequently issue “holds” on a customer’s credit card when the information of the card is initially taken. This is to ensure that the customer will have enough available credit to pay for the car rental or hotel room when the final charges are placed. This “hold” may take several days to be reversed.
4. Your card has been exposed to a potential threat. If there’s a possibility that your card could have been exposed to a threat, your card might be rendered temporarily unusable to protect your account.

Yes. Most credit cards will let you withdraw cash at an ATM. Borrowing money on your credit card is a cash advance, a type of short-term loan. Cash advances usually come with very high fees and are not generally recommended.

Narrow your choices by asking the right questions. For example:

1. Will this card help me build my credit?
2. How much does it cost to open an account, including the annual fee?
3. If there is a 0% Annual Percentage Rate (APR) period, what is the ongoing APR interest rate?
4. Do I want a rewards or regular card? Rewards cards tend to be more expensive.

1. The easiest way for any student to get a credit card is to open a secured credit card account in your own name. With a low deposit you can open a secured credit card that will report to all major credit bureaus and offer a credit limit of at least $200. The only difference between a secured card and an unsecured card is that secured cards require collateral.
2. Be an authorized user. Becoming an authorized user is a way to get the benefits of having a credit card, even if you can’t qualify for a credit card on your own. Suppose a parent adds his or her child as an authorized user to a credit card account with 20 years of on-time payment history. Within a month or two, that history will start showing up on the student’s credit report. It’s possible to go from no credit score to a good credit score just by becoming an authorized user.
3. Sign up for a joint account. A joint credit card account is simple: two people sign up to share one credit card account, sharing the privilege of charging purchases to the card, as well as the responsibility of paying off the balances.
   A student may get approved for a joint credit card if the co-applicant has a high credit score and income. This can get messy, since two people ultimately have the power to charge purchases to the card and share in the responsibility of paying it back. Realistically, shared responsibility to repay balances only means so much. You probably shouldn’t expect a student to come up with the cash to repay a balance given their limited budgets. So, it wouldn’t be wise to apply jointly with a student who you wouldn’t trust with access to financial accounts.

All things considered, a secured card is probably the best bet because it offers the opportunity to start building credit without risking someone else’s finances in the process.

The best credit card option for most people with bad credit is a secured card. Secured credit cards charge the lowest fees and offer the best approval odds. A secured credit card requires collateral in the form of a monetary deposit to protect the creditor from non-payment.