When you use it to purchase something, do they send you a bill every month with the cost of what you spent plus interest? Are there options for automatic payment directly from bank account?
Update:
What do you mean by interest is invisible?
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ya they send u the bill but not the interest it is invisible LOL
EX. last month i bought a TV by credit every mount i need to pay $ 30 + $ 20 interest if i wont pay interest it will stay on my account balance and in the end i still will need to caver it …. :S
Credit cards have a compound, roll-over interest. This interest is usually 24 % per annum (per year), which translates to 2 % per month. This is an example of how it works:
I want to buy a PC that’s $1500, but I have no money. I buy it on credit. The bank pays for the whole PC, and I can bring it home right there and then.
At the end of the month, I owe the bank $1500, plus $30 (2% of $1500 is $30).
Say I decide not to pay it.
Well then next month, the amount I owe becomes $1530, plus $30.60 (2 % of $1530 is $30.60). And so forth. So the longer I don’t pay back the debt, the faster it builds. There is usually a minimum repayment on the bill. For example, the credit card company may insist that you pay back at least $50 every month.
However, you are never forced to pay back more than the minimum sum.
In addition to repayments, credit cards have other fees. Some cards have a “late fee” of 2 %. There are also administration fees, fees for exceeding credit limits, etc. Credit card companies are notorious for concealing these fees. They are also famous for concealing their “credit cycle”.
So they may say you get slapped with 2 % interest at the end of the month, but no one knows when exactly “the end of the month” is. It may be on the 30th, 31st, 1st, etc. And if you’re even one day late, you get hit by 2% late payment fee plus 2% compound interest. You can try asking, but then you have to keep track by calling and asking every month, since the specific day changes.
This is why people with more than 3 credit cards end up getting into serious debt. They all have different interest rates, cycles, and fees, and you need a small army of accountants to keep track.
A credit card also has a “credit limit”, which is usually twice your salary. So if you make $2,500 a month, the average credit card will let you spend up to $5,000 before they don’t give you any more credit. That’s if they’re being nice.
If they’re vicious, they won’t tell you when you exceed the credit limit; they just let you spend more. Then they hit you with 2% interest plus 2% penalty for exceeding the limit. And then 2 % administration charge for allocating the new funds. So suddenly, your repayment costs just jumped to 6 %.
Most credit cards also have an income cap of $30,000 a year. If you make less, they usually won’t give you a card (because they’re afraid you can’t pay back what you owe).
For more on credit cards, see this blog article:
Yes, a monthly bill, yes plus interest (IF you are foolish enough to spend beyond your means and do not pay it off every single month) and yes you can sign up for automatic payments.
The interest is not invisible and clearly stated each month.
See the replies did not take seventy two paragraphs to clearly answer you.