A personal credit card is a card which provides access to a personal line of credit. When a consumer uses a personal credit card, a merchant swipes the card through a device which reads a magnetic strip on the back to gather information about the consumer and his or her account. If the transaction is authorized, funds are released to the merchant to pay for the goods or services the consumer wishes to buy. Transactions can also be carried out remotely if a merchant is given a credit card number and expiration date. Every month, the consumer is sent a statement of account, listing the charges made with the card and a balance due, which is usually a percentage of the total balance on the credit card.
Personal credit cards are a form of revolving credit, which means that consumers can continue to build up and reduce a balance potentially infinitely, as long as they keep their account current and keep the balance below the maximum amount set by the credit card company. Some people opt to pay off their credit cards in full every month to avoid interest charges, while others may pay down a portion of the balance every month, incurring interest charges on the balance which is carried over.
Classically, personal credit cards are unsecured. When someone applies for a credit card, the issuing agency determines the creditworthiness of the consumer and sets a credit limit which it feels is reasonable. As someone demonstrates responsible use of the card, the credit limit may be expanded. Conversely, poor use can lead the issuer to reduce the maximum allowable balance to minimize risk. Use of the personal credit card card may be associated with annual fee for the account, and interest rates usually vary depending on whether they are used for credit transactions, cash withdrawals against the credit line, or checks written against the credit line.
Secured credit cards, typically backed by cash deposited into an account, are also available. With a secured credit card, the consumer still needs to pay the bill every month, but if he or she defaults, the funds deposited as security can be retained by the credit card company to make good on the customer's account. Secured credit cards are not the same as bank cards linked to a bank account, because the funds for the transaction come in the form of a line of credit, not out of the consumer's personal cash account. For people with bad credit who are trying to improve their credit scores or establish a new credit history, a secured credit card can be an excellent option.
When selecting a personal credit card, consumers should do their research with care. If a card has a low introductory rate, a consumer should check to see how long the rate will last, and what the rate will change to when the introductory period is over. A personal credit card can also come with a high annual fee, which is something to be aware of, and consumers may want to consider the impact that opening a revolving line of credit will have on their credit score.
