Credit Card Account
Types of Credit Accounts
Are you thinking about a credit card account but are unsure about what separate this type of card from other kinds of credit?
Credit lenders in general, issue three types of accounts. These are:
Credit Card (Revolving Agreement)
Charge Card
Installment Agreement
In addition to the above three main types, other forms include:
Credit Card Merchant Accounts
Secured Credit Card
Credit card credit or (revolving credit) comes under the remit of issuing banks and other financial institutions. In addition to these establishments, there are organisations that promote their own branded credit cards. For instance, stores and retail
chains - store cards, corporate user credit accounts etc.,
Revolving agreement is typical of a credit card account, in that
it does not have a fixed number of payments but instead allows you to pay off the interest element as well as a proportion of the balance each month. For this privilege you are charged a fee.
Here are some of the characteristics commonly associated with a card account or revolving agreement:
You are allowed to use or withdraw funds from that account up to the value of your pre-approved credit limit
The amount of your card account balance will increase and decrease in line with the amount you use and then subsequently
repay. You can use, repay and re-use the pre-approved limit
of your account on an ongoing basis - revolving
You make monthly payments along with interest only on the amount you use in any given period - and not on the entire credit limit
This type of credit card make it possible for you to repay a greater portion of the monies you use, over a period of time,
although you must ensure you make the requested minimum monthly payment set out in your statement. If you choose to make the
minimum payment on this type of credit account, you will be charged interest on the remaining balance. Alternatively, you also have the option of repaying your borrowings in full each month, or at any other time, so as not to incur any interest charges
Apart from the credit card account, there are very many other
variations and examples of revolving credit agreements. Some typical examples include:
Line of credit
Some loans - e.g. home equity loans
Department store credit cards
Charge Card
In contrast to the revolving agreement or credit card account, charge cards or charge agreements provide you
with the means of getting a short term loan, say, for one month, to enable you to make larger purchases.
Although a charge card is similar to a credit card,
there is one fundamental difference. That is, with a charge agreement or charge card, there is no minimum payment and you will be required to make payment of the full outstanding balance when it becomes due at the end of the charge period.
The charge card work on the premise that since it is not a loan
as such, there is no interest. However, should you make no payment or just a partial payment, you will be served with a hefty late payment fee that can be as much as 5% of the
outstanding balance. You might also be penalised by way of a
restriction of further transactions or even face cancellation of
your card. Charge cards and charge accounts are commonly used by businesses with the requirement that repayment is made on the above basis.
The content on this site is purely for information purposes only and is not intended to replace your seeking professional financial advice.
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