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In the United States, it is possible to find a multitude of entities that offer credit cards, in addition to banks. Bank cards have become the main way of payment for everyday consumer purchases.
Technology has also advanced a lot and the possibilities for card payments have multiplied. Today it is possible to pay easily in any establishment simply by bringing your card close to the POS, ATMs also allow you to pay bills with a card and any vendor on the street can carry his wireless sales terminal with which to charge you.
It is also possible to use electronic devices instead of cards, such as cell phones, smart watches or bracelets with contactless technology, which allow us to pay by bringing them close to the POS, without having to carry your card with you.
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Types of bank cards
Nowadays, banks and financial institutions market a wide range of cards, which can be classified as follows:
Debit cards
In the USA, you receive a debit card when you decide to open a checking account, and even with some savings account. These plastic cards are used for common transactions and stand out for:
- Being linked to the funds you have in the account to withdraw cash from the ATM, pay at online or offline merchants that accept them and transfer funds within the country.
- Being backed by different brands dedicated to facilitating various payment methods, such as MasterCard, American Express and Visa.
- Have several types of technology to process the payment at the point of sale or ecommerce: magnetic stripe, chip and contactless.
Prepaid cards
While prepaid cards work in the same way as debit cards, it doesn't hurt to put them in a separate category. The reason: they can be issued by both banks and non-financial institutions. Their operation is elementary and consists of:
- This type of plastic is not associated to any account but to a prepaid balance which has a limit established by the issuing entity.
- It can be used for purchases in physical or online stores, ATM withdrawals and even to make domestic transfers to another person.
- These cards are easy to obtain, since you only have to buy them. The way to charge money to them is by online transfer, check, cash or transfer from a credit card.
Credit cards
Finally, there are the plastic cards that we all want to have, but few know how to manage wisely. Credit cards are the most recognized banking products on the planet and to obtain some of them it will be necessary to meet certain requirements. Among their relevant aspects, we can highlight:
- They work as an installment loan with revolving nature and a higher interest rate than other types of financing.
- They can be used to purchase products or services through various payment processes, such as POS, IVR, MOTO and ecommerce.
- They are enabled to be used inside and outside the country, you can withdraw money from the ATM and transfer funds to accounts or prepaid cards.
- Those who use these instruments do not depend on the amount of money they have in their account. The issuing bank offers them a line of credit with interest charged on daily balances, an established limit and cut-off and payment dates.
Credit card fees
Although debit and prepaid cards may also include some fees, the ones that usually include the most costs are credit cards, so we are going to focus on them to analyze the most common charges that may apply, although they do not always do so:
Balance Transfer Fee
In the United States it is very common to transfer balances between different credit cards, including the contracting of new cards to transfer balances from others that have a higher interest rate.
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In fact, there are cards that charge 0% interest for the first few months so that you can transfer balances from other cards and not pay interest on them.
This fee, if applied, can be between 3% and 5% of the amount transferred.
Annual Fee
This is a fee charged each year to use the credit card. Nowadays it is possible to find many credit cards that do not apply this fee, which is usually more common in the most exclusive credit cards, those that incorporate a lot of coverage and extra services, designed for people with high purchasing power.
Cash Advance Fee
In addition to making purchases, credit cards can also be used to get some money to your checking account or withdraw it from an ATM. For this operation, the bank may charge a cash advance fee that can be more than 5% of the amount withdrawn.
In addition, if this used balance is not returned in full the following month, you will have to pay interest on it until it is fully repaid.
Foreign Transaction Fee
This is the fee that applies when you use your credit card in another country outside the USA, either to withdraw cash from an ATM or to store in any store, pay in a restaurant or hire a service, such as a rental car or a guided tour.
If you are going to travel a lot you will be interested in having credit cards that do not apply this charge.
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In addition to all these fees and others that may exist, you already know that the entire balance drawn on the card, whether for purchases or cash withdrawals, will accrue interest if it is not returned on the next payment date. So if you don't want to be charged interest, you must pay it in full.
Frequently asked questions about credit cards
Taking out a financing product such as a new credit card comes with a number of natural questions that everyone asks. It is always best to know what to expect from this instrument and to know in detail how it really works.
In this spirit of knowledge, we will share with you some of the most frequently asked questions about credit cards.
What are their requirements?
The answer to this question may vary. Being in the United States, you know that your credit score will be a determining factor for you to be granted the card you want.
Other common requirements are: income level, minimum spending and a social security number or an ITIN number. Remember that applying for a credit card is one of the most complicated procedures if you are not pre-approved.
What is the difference between a Gold, Platinum or Black card?
In addition to the colors, these plastics are linked to the customer's financial status and the credit limit established by the bank's analysis.
As you move up the prestige level, you get more benefits and coverage. For example, while with a Platinum you can spend up to $10,000-$100,000, with a Black card there are no such limitations.
Can I have additional credit cards?
Certainly. The vast majority of U.S. banks allow you to apply for extra credit cards for your spouse, immediate family members or children over the age of 18 or 21 (depending on the state). Applying for an additional credit card may have an added cost depending on the bank where you apply.
What is the cut-off and payment date?
Basically, they are 2 dates within the calendar that are assigned to keep track of your expenses with the plastic.
The first one is usually at the beginning of the month and indicates the day when your bank informs you what you owe in relation to what you have spent. The second, which usually comes 10 days later, is the day you have to pay what you owe or a portion of it.
How many credit cards should I have?
Many experts recommend having at least 2 cards, one for major expenses and one for emergencies. This will also depend on how you currently manage your income. If you are a person who makes too many impulsive decisions, one should be enough.
What types of insurance do these cards offer?
That will depend on the type of credit card that the financial entity grants you. The most frequent coverages are related to purchase protection, ATM theft, travel incidents, life insurance, third party damages when driving a rented car, among others.
The more cache the product has, the better the linked policies will be.
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How can I cancel one of my cards?
Easier than getting it, the process to cancel a plastic card can be done in person, by phone or online. You will need to show an official document that identifies you and pay off the outstanding balance in order for the bank to cancel the corresponding credit card.
What should I do in case of theft or loss?
It is important that you contact the bank to tell them what happened to block the card and avoid paying for any fraudulent operation. There are also entities that allow you to block your card from the app or their website.
How to compare different credit cards
This type of card is the one that has the most aspects to look at in order to compare between different alternatives, but it is also the most versatile and the one that offers the most services, so it is important to choose well to make the most of its advantages.
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These are the main factors to take into account when comparing credit cards.
- Interest rates. This is the percentage applied by the entity for financing the balance drawn down. In the event that not all of it is repaid at the end of the billing period, interest will be applied to the remaining balance, which is usually a variable rate.
- Fees. Depending on the use we are going to make of it, we will be interested in some commissions or others, trying to avoid those that are applied on the operations that we are going to make the most.
- APR (Annual Percentage Rate). The annual percentage rate is the best indicator for comparing two different credit cards, since it not only takes into account the interest applied but also the different fees.
- Cash back and Rewards Points. Most of the credit cards marketed by banks and financial institutions in the USA have some kind of discount on purchases or program to accumulate points that you can later use on your purchases or receive in cash. Analyze these promotions well to find out which one you can get the most out of.
- Coverage and Insurance. The free policies that come with these products can be very useful on certain occasions, especially when traveling, with insurance for lost luggage, coverage for flight delays, assistance in case of accidents, etc. You can also find insurance that covers damage to products purchased with the card, or extended warranties.
- Additional services. The most exclusive cards, such as Platinum, Mastercard World Elite or Visa Infinite, offer a wide range of additional services, such as access to VIP lounges at airports, a 24-hour assistance service for any questions or reservations you want to make around the world, airport transfers, exclusive services in luxury hotels and much more.
How to compare different debit cards
With debit cards we do not find so many differences, apart from the possible annual fee, which is usually not paid, or some special offer or discount, they do not usually differ too much from each other.
These cards are linked to bank accounts, in which we can find different factors consider, but we would be talking about comparing accounts with each other, without paying special attention to the debit card itself.
One aspect that we can highlight and that may be interesting, is the possibility of withdraw cash with the card at any ATM for free, regardless of whether it is from the bank itself or from another financial institution, even abroad.
How to compare different prepaid cards
Prepaid cards can be differentiated by the commission charged for reloads and the annual fee. Normally, if one prepaid card charges one of those fee, doesn't charges the other one, but it is in our interest to calculate which option is more profitable depending on the use we are going to make of it.
We can also look at the balance limit that can be loaded, since if we want to use it for large purchases and the limit is low, it will not be useful.
Español: Comparador de tarjetas de crédito, débito y prepago