Easy Steps for Credit Card Protection

What is a Credit Card?

A credit card is a plastic card that enables an individual to purchase goods, products or services by way of a credit line. Financial institutions, such as credit card companies or banks, will offer credit cards to those consumers who represent an ability, through their credit rating, to meet the terms of the credit card contract.

It is crucial to understand the varying interest rates, or APRs, attached to each credit card. Generally, those individuals with lower credit ratings, if approved, will receive a credit card with unfavorable terms and high interest rates.

A credit card’s rates are applied to the individual’s balance at the end of each billing cycle. For example, if an individual is given a credit card with $500 worth of credit and an APR of 20% and the individual spends throughout the month, or length of the cycle, the full amount of available credit, he or she is required to pay the lending institution the full $500.

If the individual does not pay the $500 and only pays the minimum (typically $15) the APR of 20% will be applied to the next individual’s bill in the form of a monthly fee (.20/12), or .01667. Add 1 to this figure to reveal 1.016, which is then multiplied by your remaining balance. Therefore, if you have $485 due next month, you will take $485 and multiply it by 1.016 to yield a new balance of $492.76. The terms attached to each credit card will vary based on the issuing institution’s protocol and the credit score of the prospective borrower.

Why is Credit Card Protection Important?

All credit cards contain a 16-digit credit card number. This number, which is found on the front of the card, signifies the holder’s credit account. It is this information that enables a merchant to view the amount of available credit to which the individual has access. With the advent of online purchases, all a user needs in most instances is to input this 16 digit number, the expiration date on the front of the card, as well as the CV-2 code found on the back of the card to initiate a purchase.

As a result of the minimum requirements for purchase online, a user can initiate a transaction by copying or stealing a credit card holder’s information that is printed on the front and back of their card.

Crucial Steps for Credit Card Protection

Since your credit card account number is printed on the front of your card, you must be sure to know where your credit card is at all times. If you happen to lose your card or it is stolen, a crucial step to credit card protection requires you to immediately contact your issuing institution to inform them of the missing card.

When the bank records that the card is not in your possession it will close the count rendering the lost card inactive. The issuing company will then mail you a replacement. The most common mechanism for fraudulent credit card use is the unauthorized use acquired from lost or stolen cards.

Another important step of credit card protection is signing the authorization strip located on the bank of the card. By signing your unique signature, merchants can compare the signature on the receipt (at the time of purchase) to the back of the card to ensure that the purchasing party is indeed the cardholder.

Another crucial element to credit card protection requires the holder to thoroughly review all bills and expenses. Make sure that your purchases match up with your bill. If any fraudulent activity or inaccuracies are found on your bill, be sure to report them to your issuing credit card company.

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