Credit Cards

Credit cards offer consumers the option of paying for large and small purchases. The card is a thin plastic that contains the owner's identification. Usually, it has a picture of the owner to avoid unauthorized individuals from drawing cash. The card gives the owner the authority to pay for purchases up to a certain credit limit. The credit card company usually charges the owner interest within a month. Credit cards can be read by card readers in stores, by ATMs and by bank or credit card company computers.

A Brief History

Credit cards originated in the US in the 20's. They were originally issued to customers who often made purchases in oil companies and hotel chains. In 1950, Diners Club Inc. introduced the first universal credit card. This card was used to make purchases in different businesses and stores. The credit card company charged the owners of the cards monthly interest and an annual fee. By 1958, American Express also established its own line of credit cards. In 1959, the Bank of America started a national bank plan called BankAmericard. This system was later called Visa in 1976. The MasterCard followed shortly afterwards. Nowadays, many credit card companies operate on the territory of Canada, and other parts of the world.

Opening a Credit Card Account

Opening a credit card account is a very simple process. In Canada, there are not many credit card options to choose from unlike the United States. However, there are still plenty of choices to compare. The most common credit cards in the country are Visa and MasterCard. In order to open an account, simply go to the credit card company or a bank and choose which type of credit card that best works for you.

Interest Rates

The interest rates on credit cards vary from one company to another. It is best to check the Internet for information and choose one that has the best to offer. Typically, credit card companies do not charge interest when the borrowed money is paid in full before the due date. The interest only kicks in after that date. Some people never have to pay any interest charges, but this is not generally the case. Most credit card users build up a lot of credit that they cannot pay in full at the due date. Credit card companies can charge as much as 23 percent interest on unpaid credit, a risk that users must consider.

Secured and Unsecured Credit Cards

Basically, credit cards are unsecured since any person with a good source of income can apply for one. Unsecured credit cards do not require a deposit of money to be used. Once the card is obtained, the owner is given the right to purchase any product or service up to a certain credit limit. For people who have a bad credit score, obtaining an unsecured card may not be easy. For this reason, credit card companies also offer secured credit cards. Secured ones require an initial deposit before they can be used.

Last but not the least credit cards can help you built your credit history, granted you pay your credit card bills on time.

On the other hand credit card debt is very expensive. If you plan to carry balance on your credit card you are better off with a personal line of credit. You can easily affect your credit rating negatively if you don't pay your credit cards on time. Statistics have shown that people are likely to spend more using credit card versus using debit card or plain old cash. Credit cards are convenient, but it's very easy to overspend and then you might have to pay high interest fees.