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  • Used wisely, credit is a powerful financial tool; but if used carelessly, it can lead to a heavy debt load. Whether you’ve accumulated debt or are considering credit options, understanding the essentials of credit and debt management will help you remain on solid financial ground.

    Credit Cards

    It’s essential to understand all the features of any credit card you take out. Here, we explore interest rates, credit limit and fees, as well as your rights when you sign up for a credit card.

    Credit History

    Your credit history will determine how much you can borrow and the interest rate you pay. It’s an essential tool lenders use when deciding whether to lend you money.

    Debt

    Taking charge of your debts is the first step to financial freedom.

    Identity Theft

    Identity theft is a serious problem. If you are the victim of identity theft you can find out here about whom you need to tell and what you can do to protect yourself against theft of your personal information.

    Credit Cards

    Credit cards offer many advantages. There is the convenience of being able to buy needed items now and the security of not having to carry cash. You also receive fraud protection and in some cases rewards for making purchases.

    With these advantages also come responsibilities. You need to manage credit cards wisely by understanding all of the card’s terms and conditions; stay on top of payments; and understand the true cost of purchases made with credit. Using a credit card is like taking out a loan. If you don’t pay your card balance in full each month, you’ll pay interest on that loan.

    Choose Wisely

    The best way to maximise the benefits of credit cards is to understand your financial lifestyle – your money needs and wants. Once you determine how you’ll use a credit card, it’s important to understand all of the card’s features including:

    • Annual interest rates and whether rates are fixed or variable
    • Annual and late fees, as well as fees if you go over your credit limit
    • Credit limit on account
    • Rewards points
    Understand Your Rights

    Credit cardholders are entitled to protections:

    • Zero liability means you are not responsible for fraudulent activity on your card when you report it promptly.
    • In some cases, you have the right to dispute purchases with merchants for unsatisfactory products or services.
    Credit or debit?

    Credit cards make breaches of financial security slightly easier to address. With a credit card, a consumer has at least 21 days from the time a statement is available to pay the amount due. That’s plenty of time to notice unauthorised charges, notify your issuer of the problem, and have them removed from your bill. With a debit card, on the other hand, a thief could clear out your bank account before you notice. Although you will recover all of your money, finding your bank account empty can be quite a shock.

    What about cash?

    The real difference in financial security comes when you compare both credit cards and debit cards to cash. If a thief gets hold of your cash, there’s really nothing you can do, except make a report to the police. Cash doesn’t come with a $0 liability guarantee, after all.

    What about prepaid cards?

    In terms of liability, prepaid cards are similar to debit cards. The primary difference is that instead of being linked to a bank account, a prepaid card is linked to a reloadable prepaid account.

    Credit cards and debit cards have far greater purchasing power than the cash you carry in your wallet, yet they also offer considerably lower liability than other forms of payment. However, fraud can lead to considerable hassle and financial troubles, so make sure you continue to take steps to safeguard your personal finances.