Free Credit Cards Essay Sample

Credit cards are issued to interested customers as payment cards that are accepted by most merchants and service providers across the globe. Credit cards can also be used to do online shopping and to make withdrawals from ATM machines. Credit cards are small cards with implanted computer chips that track the cardholder’s purchase and report the purchase to their bank accounts. Credit cards are mainly issued by banks after entering into agreement with several merchants and service providers to accept the cards in lieu of money. When a credit card holder makes a purchase by using the card, the merchant verifies the validity of the card through an electronic system. On acceptance of the card by the merchant, the cardholder technically agrees to pay the card issuing bank the equivalent amount through acknowledging a receipt and entering his PIN (Personal Identification Number) in the swiping machine. Periodically, preferably every month, the cardholder pays his issuing bank the amount equivalent to the credit he has availed against the card. Credit cards provide many advantages to the users as long as they are cautious in using the facility and do not fall into any pitfall.
Interestingly, every credit card transaction involves four parties: the card holder, the merchant, the card issuing bank who provides credit to the cardholder and the payment networks like Visa and MasterCard. Card issuers usually set credit limit for the users based on their credit worthiness. The card user can pay the credit amount within the next due date from the date of purchase. Interest rates as fixed by the issuing banks are applicable for payments made after the due date. Technically, the issuing bank bears the risk if the dues are not paid back by the customers. The merchants pay processing fee to the payment networks whereas the banks profit from the annual fees they collect from the customers and the high interest amounts they collect from late payers. Therefore, customers can benefit from credit cards if they promptly make their payment to the issuing banks. On the other hand, there are merchants who provide discounts if customers make cash payment since merchants do not have to pay processing fees to the payment networks. Merchants and service providers still have more advantage since they attract more customers who prefer to avoid the risk of carrying a lot of money in hand.
Some of the benefits one gets from credit cards include building a trustworthy credit history, ease of purchase and overcoming emergencies. For instance, maintaining a good credit history by effecting timely payment will be helpful when a person goes for availing higher credits to buy a house or car. The fact that they do not have to carry cash all the time is a good news for individuals who are worried about thieves; older people, tourist and frequent travelers find credit cards more convenient. During emergencies like a road accident when people have to mobilize huge sums of money within a short period, credit cards can fulfill immediate needs. Credit cards also have certain potential disadvantages. For example, they tempt individuals to buy unwanted goods, which they may not buy for cash. Secondly, the interest rates banks charge for late payments are very high. People may also lose track of their expenses if they frequently use credit cards. There is also the threat of losing the cards or identity theft by hackers.
Standard credit cards are the more common type of cards issued to common public who fulfill the criteria fixed by issuing banks. These cards do not require customers to maintain any deposits with the bank. Secured credit cards demand a collateral deposit with the card issuing bank. The user can use the card for purchasing or availing services equivalent to his secured deposits. Sometimes banks may increase the credit limit based on prompt payment history. A person’s spending habits decides the type of card best suited for him. If a customer can take advantage of the interest free period to pay the bills promptly each month, a standard card is more preferable. A card that charges a low interest rate is advisable to individuals who cannot pay promptly the debts each month. Loyalty points and rewards on amount spent offered by card issuers are certain other criteria that help in choosing a credit card.
Credit cards are very convenient to the users and the standard size cards can fit comfortably in the users’ wallets. Issuing credit cards provides an additional business opportunity for banks and networking service providers. The convenience of using credit cards attracts many takers while promoting business at the marketplace. However, it is up to the cardholders to wisely use credit cards to avoid falling prey to debt traps and a shopping culture influenced by marketers and advertisers.