A student credit card isn’t really different from a regular credit card. They work the same. They might look a little different as credit card companies have tried to appeal to the students by either allowing them to personalize the card with a picture, initial or by choosing a few preset options. But the small plastic cards still enable the student to purchase goods and services on credit, with the promise to pay at a later date.
The card issuer can be a bank or other financial institution, or the cards can be issued by the retail store or service company for their specific product. The card issuer sets a limit to the card holder and based on how payments are made, the card holder may raise or lower that limit.
Having a student credit card can be a great way to establish a credit history. But these credit cards often carry a high interest rate. A quick perusal of rates showed that percentages varied widely from a credit union credit card of under 10% with no fees and no reward offered, to cards with an interest rate of over 21%.
Credit Card versus Charge Card
Student can get either a credit card, or a charge card. Even thought the terms are often used interchangeably, there is a difference. A charge card requires you to pay the total balance of money charged to the card at the end of each month. They usually have an annual fee, offer rewards and if you pay the entire bill each month, there is no interest charged. An example of this type of card would be the traditional American Express Green Card.
A credit card would allow the student to carry a balance forward and pay anywhere from the minimum monthly payment, to the full amount charged to the card. With a credit card, interest accrues each month on the balance left over after a payment is made.
New Rules And Regulations
There are new rules and regulations that will take effect as of August 2010 that specifically address student credit cards. An adult cosigner is now required for all students or anyone that is under 21 years old, unless the under 21 year old can prove they have consistent means to pay for the credit card. The adult co-signer will be asked to assume responsibility for the credit card payments and to prove that they can afford to make those payments if the student defaults.
Another rule that affects students under the new laws is that the credit card companies will no longer be allowed to market on or near campus if they offer promo items like free pizza or gifts if the student fills out a credit card application.
These new regulations are designed to stop students from getting a credit card, defaulting and leaving their parents liable for the credit card debt when they didn’t even know that the student had a credit card.
Secured Credit Cards
One option often offered to students is a secured credit card. This type of credit card requires a security deposit on the account. That deposit generally equals the credit limit. The deposit is held in a special savings account; it does accrue interest, but can’t be accessed by the account owner. The credit card can be utilized for any purchases and after having the secured credit card for a year and establishing a history of on time payments, the card issuer will generally re-evaluate the card holder’s status. At this time if the payments have been made on time, the security deposit is released and a credit limit assigned to the card holder.
Prepaid &Credit-Cards"
These cards are not actually credit cards but are a type of stored value card. There is no credit check done for these types of cards. The parent or student simply makes a deposit that stores money on a card. These prepaid cards carry a credit-card brand like Visa, Discover or American Express, and can be used just like any credit card. The money stored on the card is reduced each time the card is used.
Prepaid cards can be given to students as young as thirteen years of age. There is no interest on these cards, there is sometimes a fee to purchase the card and there may be monthly fees or “non-use” fees if the card is not used in a specified period of time. As with any type of credit card, make sure you verify all the fees.
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Credit cards have become a part of everyday life. These small plastic cards enable the holder to purchase goods and services on credit, with the promise to pay at a later date. The issuer of the card can be a bank or other financial institution, or the cards can be issued by the retail store or service company for their specific product. The card issuer will set a limit or assign a line of credit to the card holder.
Credit Card versus Charge Card
Credit cards differ from charge cards, although the terms are often intertwined and used to describe either one. A charge card means that the total balance of money charged to the card has to be paid at the end of the month. An example of this would be the traditional American Express Green Card where you have to payoff the total balance each month.
A credit card allows the holder to pay anywhere from the minimum monthly payment, to the full amount on the months balance. With a credit card, interest accrues each month on the balance left over after a payment is made.
Getting a Credit Card
To apply for any type of credit card generally means filling out a credit application and getting approval. The approval is usually based on your credit rating. Some stores will issue you their card without a separate approval if you already have one of the major credit cards. A major credit card is generally thought to be American Express, Visa, MasterCard, Discover and Diners.
Once you are approved, you will be given a limit that is usually based on your credit rating, your income and your ability to pay. Your ability to pay can be based on the other loans or credit card limits that you have. Sometimes credit card companies will start you with their minimum limit and then increase this limit over time, based on if you make your payments on time. They may also increase your limit based on if you pay more than the minimum payment each month.
Using a Credit Card
Major credit cards have the most flexibility. Most retailers and service organizations in the US will take all or most of the major cards. Again, the major credit cards are traditionally considered to be American Express, Discover, MasterCard, Visa and Diners.
But you can get the cards from a number of different sources. My credit union has a Visa card, but the charges and fees for this Visa card are totally different that the fees for a Visa card from another bank. If you plan on applying for a major credit card, do a little research. There are some exceptions to their acceptance and they vary greatly in fees. For instance, if you travel overseas, the Citibank Visa card is the only credit card that doesn’t charge a currency exchange fee. Many restaurants and overseas businesses will take the Diners credit card, but most retail stores and service organizations in the US don’t take Diners, especially if you aren’t in one of the major cities.
Some organizations will advertise that they “only take Visa,” or Discover, etc. They do this because they get some type of bonus or discount on their credit fees for specifying only one card. So before you make a choice on cards, look around and see what card(s) are accepted at the businesses you frequent.
Charges and Fees
Don’t forget to check out the charges and fees for a specific card issuer. Some cards have an annual fee, some don’t. The interest rates, late fees, and other charges vary greatly from company to company. And this means if you check on the charges for a Visa from one bank, they most likely will not be the same charges and fees as getting a Visa card from another bank. Just because it’s a Visa, doesn’t mean the charges are the same across all issuers.
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A Business Credit Card can be used by any size business. The credit card will enable the company to purchase goods and services on credit, with the promise to pay at a later date. The issuer of the Business credit card can be a bank or other financial institution, or the cards can be issued by the office supply store, other retail outlets or service company for their specific products. The card issuer sets a specific limit that basically assigns a line of credit to the card holder.
Business Credit Card versus Charge Card
Credit cards are different from charge cards. But sometimes the terms are intertwined and used to describe either one. A charge card will require you to pay off the total balance on the card at the end of the month. They normally don’t have a preset spending limit, but remember, the TOTAL balance must be paid in full each month. An example of this would be the traditional American Express Business Cards or the new JP Morgan Chase INK cards.
A true credit card will allow the business to carry forward a balance and pay anywhere from the minimum monthly payment, to the months entire balance. With a credit card, interest accrues each month on the balance left over after a payment is made.
Business Line of Credit versus Credit Cards
A business line of credit is a loan that businesses can utilize when they need to. A line of credit generally has a smaller interest rate than a credit card. But in the current financial climate, these lines of credit are harder to get. They often require you to present a business plan; work directly with the business lending area of the financial institute, and getting approval or hearing back from these institutions on your request can often take several weeks. Business Credit Card lending is typically easier to arrange. Often applications can be handled online and approval generated within minutes. Once you are approved, you generally receive your business credit card within just a few days.
Getting a Business Credit Card
For smaller businesses that don’t have their own credit history, the approval of the business credit card will often be based on the owner’s personal credit history. It is important that you make sure your credit report is as clean as it can be by getting the reports annually and looking at them to ensure the information is correct. You can do this free through any number of online sites; one popular site for this is www.annualcreditreport.com.
Benefits of a Business Card
There can be many reasons and benefits to utilize a Business Credit Card. One of the main benefits is to separate your business expenses from your personal ones. Especially if you are a small business owner who often uses their personal credit card and then has to go back and separate what was for the business and what was personal at tax time. A business credit card can save you time and confusion.
Especially since the business credit card issuer provides more detailed reports for your purchases. These itemized reports often categorize your expenses and provide a year-end summary that is perfect for reporting tax deductions. These reports can be beneficial not only at tax time, but for monthly bookkeeping tasks.
Having a business credit card helps you build credit for your business. This may help in the long run when you need to apply for larger financial assistance or loans to expand your business. Additionally, if you have employees you can distribute supplementary cards on the account if needed and utilize the cards to keep track of an employee’s spending.
Incentives and Awards
Many business credit cards have very attractive awards programs that are exclusive to business owners. From 3% cash back on all purchases to awards that will allow you to travel or pay part of your credit card bill, it is worth understanding what the differences are for the programs.
Credit Cards Differ
Don’t forget to compare all the charges and fees for a specific card. Some card issuers have multiple flavors of business credit cards and all the rates and fees differ even for the same company. Some cards have an annual fee, some don’t. The interest rates, late fees, and other charges vary greatly not only from company to company, but between cards within the same financial institution.
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Whatever the reasons are for businesses to need cash, many find it hard to do it through conventional banks and traditional lenders – especially these days. So instead they are turning to special merchant cash advances or what is commonly referred to as a business cash advance loan.
With the influence of the 2008 and 2009 credit crisis still sending shockwaves through the economy, many businesses find it much more difficult to get the loans they need to continue smooth operations. Some need fast cash to take advantage of bargains and make strategic acquisitions of property, sign leases on stores or warehouses, or invest in new inventory and equipment to prepare for improvements in the economic outlook. Others just want to make their payrolls on time or cover their short-term expenses in order to stay afloat or avoid penalties and interest charges and dings on their credit reports. A merchant cash advance loan can potentially solve all of those cash flow problems without the hassle of applying for a conventional bank loan and without the difficulty of getting loan approval. Those who do this kind of business cash advance loan often find that it is a faster, simpler, and easier way to get the money they need.
The way a business cash advance loan typically works is through an arrangement based on the company’s future sales. Most of the time the lender agrees to provide the cash loan in exchange for repayment that will come from a percentage of the business’s credit card receipts. That kind of credit card payment plan eliminates the need for the business owner to put up other forms of collateral such as mortgage documents, pledges of existing inventory, vehicles, or other items that have value. Since no real collateral is involved there is no need to do things like appraisals, and that eliminates added expenses while it also cuts down on the time needed to process the loan and get the cash into the business owner’s hands.
Instead of following those traditional protocols and conducting the loan process the way a regular bank or conventional commercial lender would, the lender who does a business cash advance based on credit card receipts simply verifies that the business accepts credit cards. If you own a business then you can be expected to provide some basic information, such as documents to show that you are legitimately in business and have a credit card processing merchant account. You will also probably be asked to provide copies of your last 3-4 months worth of credit card receipts or merchant card processing statements, which the lender will use to determine your normal volume of credit card business or revenue that your customers and clients charge to plastic.
Then after the loan is made, a portion of those credit card sales that go through the business are earmarked as the loan repayment and they become the source of funds to pay off the loan. A business owner might borrow several thousand dollars, for example, to buy new inventory or finance an expansion or the opening of a new office and then dedicate a percentage of credit card sales over the next 12-24 months to service the repayment to the lender.
Because these loans are not subject to the same financial industry rules and regulations as normal bank loans do, they are somewhat controversial. The banking community would like to see them regulated because they represent competition for their commercial loan business and also because the banks and other regulated lenders think it is not fair for them to have to follow so many rules when those who do cash advance business loans can operate much more freely.
Most business owners don’t care one way or the other, as long as they deal with legitimate cash advance lenders who don’t try to cheat, defraud them, or charge exorbitant rates of interest. They expect to pay more interest for the convenience of these cash advances, and they usually only turn to them as a loan of last resort for emergency needs to keep a business going during difficult times. Those who borrow cash advance loans are usually already fed up with trying to get their money from conventional lenders, so they are happy to take their business to a cash advance lender instead of struggling to get a loan from their banker.
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Believe it or not gift cards have been used as far back as 1916. Now they are the most sought after gift by women, and the third most sought after gift by men. We’re talking in terms of over $80 billion dollars in sales a year in the USA alone, with the UK hitting over $3 billion, and Canada over $2 billion. Gift cards are available for nearly every business you can name, from Starbucks to Target to the high end boutique stores and restaurants.
Types of Gift Cards
Gift cards come primarily in two types, called open loop and closed loop cards. Open loop is generally issued by a bank or a credit card company and can be used in any number of different businesses. A closed loop card is issued by the company where the card will need to be used.
There is a third type of card known as a hybrid closed loop. This type is issued by a provider. But it combines several specific businesses together on one card. One example of this type of card would be a gift card issued by a shopping mall. The card could then be used in all the mall stores.
Some gift cards are bar coded and linked to a specific person by name and have the amount of the card listed on the card. Other cards are magnetic strips, have no name linked to the card – so it can be used by anyone and the card doesn’t have the amount listed on the card, it appears only on the company’s data base.
Gift cards can sometimes look like a regular credit card, but most are plastic cards resembling credit cards in size and shape, with a specific message, such as Happy Birthday or Merry Christmas. They can also carry a special message or company logo on the face of the card. This type of gift card is often used for awards or a thank you from an employer to their employees.
Personalized or customized gift cards have become more accessible for individual use also. This personalization is believed to make giving a gift card an easier choice and a more thoughtful gift.
Buyer Beware
One disadvantage to using a gift card is the wide range of rules and restrictions placed on some of the gift cards. You need to be very careful when buying a gift card because the company issuing the card is in control of those restrictions. There are no overall rules and regulations governing fees and guidelines for gift cards.
The US has no federal regulations on gift cards. Individual states have some rules or guidelines that apply to the cards and what rules are out there vary from state to state. Canada, however, has banned expiration dates and fees related to gift cards.
Some of these rules and restrictions can include what really amounts to penalties. You need to make sure the card doesn’t have an expiration date. Yes, even though it’s all paid for, it can expire. It can also decrease in value over a period of time, which is the same as charging interest in my book, and some gift cards come with a “non-use” fee.
The issuer of the card can charge administration costs, and restrict the use of the card, pretty much at their own whim. Another thing that can get scary is an issuer can change their rules without notifying the customer. In other words they could add an expiration date without letting the buyer or the receiver of the card know about the change.
So be careful when you purchase a gift card, read the fine print and know what you are getting.
Companies like gift cards. The statistics report that about 10% of all gift cards issued are not claimed, or used. The reasons for them not being used can vary from the receiver not liking or having access to the store or business where the card needs to be redeemed, to loss of the card, or card holders forgetting about the card until it is expired.
All this amounts to nearly $8 billion dollars paid out to companies in the US each year that doesn’t get redeemed. Another way of looking at that might be-money thrown away, or lost.
If you are given a gift card, you need to make sure you know if there is an expiration date, treat it like cash, and utilize it as soon as possible.
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