Credit card companies
Credit card companies can be a little confusing regarding who actually owns the credit card and who is issuing you the credit card, at first glance they may seem synonymous and common sense suggests that they are, but in actuality they could be two different firms.
A major confusion is the fact that the majority of credit card issuers are from the banks, but the credit card companies such as Visa, American Express, MasterCard, Discovery, Captial One e.t.c are the actual owners of the credit card, and provide them to the banks who issue them to us.
So how do the credit card companies and the banks actually make money from issuing credit cards?
The banks make money from the interest rates applied on the card, while the credit card companies make money from charging retailers for accepting the card. The rates charged on retailers are roughly about the same hence Mastercard and Visa are accepted virtually on the same basis with many retailers.
However certain credit card companies also issue their cards, i.e. American Express and Capital One, meaning they make money both from retailers accepting the card and from the interest charges, they also make money from late payment and other fees associated with usage of the card.
To ease the confusion, you should always select a credit card that has a great promotional rate, as well as offers, i.e. certain cards have a points offer for utilising the card, as well as points off gas and air miles, these incentive offers are issued by the card issuer to generate interests from their potential consumers, however it’s a good idea not to select offers you have no intention of using such as selecting air miles when you have no intention of travelling.
In general credit cards do prove their worth if you can keep up with the minimum payments, and avoid some of the traps that the card issuers are hoping you fall for, such as late payment fees, over limit fees, and the high interest rates that might seem excessive especially when the promotional period ends; usually people try to avoid this by moving some or the majority of their balance onto a new card with its own promotional rate once the promotional rate on the existing card ends, but you have to have a reasonably good credit to be able to do this.
Visit Debt consolidation for some great consumer credit counseling services, and dealing with credit card debts in general.
Filed under: credit cards for bad credit