Credit Card Basics You Should Know

Updated: Jan 29, 2025

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Why people use credit cards

In the basics of Western countries, a credit card is the preferred payment method. In the US, around 40% of consumers prefer using credit cards. But why are they so popular?

Reward systems

First, many consumers try them out and continue using them due to the many rewards programs that accompany them. To most people, the most crucial feature of credit cards is the reward system.

They first look for this, and only after can they focus on charges, interest rates, and other features. Rewards can come in gift cards, rebates, discounts, airline travel, cash back, etc.

When using a credit card properly, these rewards can help you recover much money. The companies that issue cards aim to make people use them for as long as possible. So far, the rewards are the most significant reason many people use credit cards.

PRO Tip
Don’t get stuck on big upfront offers. Most credit cards with big starting bonuses are usually bad for long-term use, and when the promo period expires, you will be stuck with poor conditions.

Variety of options

The second reason why more and more people are using credit cards is because of the vast range of different ones at their disposal. First of all, there are many types of other cards for consumers to choose from:

These cards are different and designed for specific lifestyles and spending habits. This means that consumers can find a card that suits them and helps them obtain basic benefits without risking financial issues.

Improved security

Paying for purchases with a credit card helps avoid fraud. When someone steals your debit card and uses it, they instantly draw money from the card. At the same time, if you schedule payments online and mail checks, they might bounce, leading to insufficient funds and fees. This is something your creditors will notice.

It doesn’t matter if this is all someone else’s fault. These events will trigger actions that lower credit scores. Reversing these phony transactions might take a lot of time, and getting the money back to the account is sometimes impossible. All of this can cause many complications people want to avoid.

At the same time, when someone fraudulently uses a credit card, you won’t lose any money from your account because of card basics features. A cardholder must only inform the credit card company of what happened and skip paying for those transactions he or she didn’t make. For the rest, it is up to the credit company to fix the issue.

Can help in case of emergency

In case of a REAL emergency, credit cards can be beneficial. You always need an emergency fund because you never know what could happen. However, not many people have $2000 in cash to pay for their car repair, plane ticket, or medical treatment.

In this scenario, paying interest on your balance is better than asking your friends to borrow money or asking your boss to give you your wages in advance. A credit card will always have available credit if you use it correctly. You will have money available in case of an emergency.

The same principle applies to credit cards for buying clothes, gadgets, and other items. If you find a good deal that is only available for a few days and you don’t have the money, you can use your card to buy the product and pay it off later.

They are convenient

Nobody likes carrying large amounts of cash with them. First of all, it’s pretty impractical to have so much money with you. It takes up a lot of space, and you need a big wallet. Additionally, if you lose your wallet, all of your money will be gone forever.

On the other hand, credit cards are tiny, easy to carry, and convenient. A single credit card can fit into any wallet and be carried easily. However, if someone steals your credit card, they won’t be able to use it because they don’t have all the necessary information.

At the same time, if you lose a card, you can contact the issuer and have it canceled. This means you won’t lose any money from your credit line. In the end, paying with credit cards is simple. It only takes a few seconds, and you don’t have to wait for change or count the money you’re giving.

How Many Do I Need?

In terms of practicality, finding a single credit card that fits your basic needs can be enough. However, this is not always the best option. First, not all cards can be used everywhere. For example, merchandise cards are usually limited to particular store(s) and aren’t accepted anywhere else.

Another vital factor to consider, of course, is building a credit score. You can do this with a single credit card, but in the right circumstances, having multiple cards will help you achieve a better credit score in less time.

Their significant considerations are the benefits. With several cards and a bit of strategy, you can always have basic rewards available on a single given card. This way, you will be able to make the most out of the benefits each one gives you.

PRO Tip
Don’t apply for multiple credit cards at the same time. Credit card issuers that check your credit report during the application process will be able to see that you have multiple inquiries. This will suggest to them that you’re desperate for credit and they will see you as a risky candidate.

Basics Of Choosing Your First Credit Card

This information about credit cards and their different sizes and shapes can be a bit overwhelming. However, when getting your first card, a simple general rule of thumb can help you choose the right one: Get a card consistent with your basic personal needs.

Don’t listen to your friends and family when choosing a card. What works for them might not work for you. If you are in college, get a student card, which is as simple as that. If you travel a lot, look for credit cards that offer a lot of travel rewards. And, if you like shopping a lot at your favorite store, see if they provide their shopping card, which is as simple as that.

Secured and unsecured credit cards

When looking at shopping credit cards or any other type of credit card, you will often see that they are categorized as secured or unsecured. But what does this mean? Not all cards are the same, and you need to understand the differences between these two terms.

Secured credit card basics

Secured credit cards are backed by a cash deposit that needs to be made by the card owner. This cash deposit is collateral for your spending through your credit card. This is why credit card issuers refer to these cards as “secure.”

Your deposit sets the spending limit on a secured credit card. If the cardholder wants to increase his or her credit limit, that person will have to put in an even larger deposit.

However, many lenders are willing to increase the spending limit without requiring an additional deposit when maintaining a good payment history. Currently, there are fewer secured card offers on the market than unsecured cards.

RELATED: Secured Cards Explained

Unsecured credit card basics

On the other hand, unsecured credit cards don’t have collateral attached to the spending limit. When a card doesn’t require a collateral deposit, it’s called “unsecured.” With unsecured cards, the lender determines the spending limit based on the overall risk the cardholder presents to them.

The card issuer determines the limit by looking at factors such as payment history, income, credit report, and credit score. If a person cannot pay off their card, the issuer will put collection actions into motion. That could include sending a debt collection agency, reporting the balance to the credit bureau, legally taking a cut of your pay, or even using you.

Bottom Line

When choosing a credit card, be realistic and analyze the basics. If you have poor credit, you may not get the best deal. However, don’t let this discourage you; you can work up the credit chain.

Consider getting a credit card that doesn’t require a credit check. One of the better options is shopping cards. Luckily, we’ve written an extensive post explaining shopping cards so that you can learn more about them.



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