Significance

• Credit cards are typically the easiest loan for a borrower to get. The application is simple and little to no verification of information is needed to procure one. Parents can add their children on as co-signers to help their children build credit. Credit cards are also the easiest form of credit to abuse. Many borrowers charge their cards up to the maximum limit before they realize their spending has gotten out of control.
  
  

Function

• A credit card allows a borrower to borrow a set amount of funds, pay the funds down and then charge them back up again. This allows the debt to function as a line of credit. To limit the impact of a credit card's balance on a borrower's credit score, the borrower should keep the balance of the card to below 30 percent of the limit.
  
  

Time Frame

• Credit cards operate on a 21- to 31-day payment schedule that allows a borrower a set time frame in which to repay the debt without incurring interest. With the 2010 credit card law changes, a borrower must be notified within 21 days of a due payment, while it has been only 14 days in the past. In addition, the law prevents double-cycle billing where the credit card company charges interest to the current and new balance. Now, charges can only be placed on the proceeding month's balance.
  
  

Considerations

• Paying the minimum payment on credit cards greatly extends the length of time it takes to repay the debt. As of early 2010, credit card issuers have to place a box on each statement that lists how long it will take to repay the debt along with total interest paid if only the minimum payment was made. In addition, it gives the borrower the amount needed to pay each month to reduce the term and the amount of overall interest paid.
  
  

Misconceptions

• Many credit card borrowers have different rates applied to different parts of their overall balance, due to balance transfers, introductory rate offers or other special deals. Many borrowers assume that the payments sent to the credit card company will be applied to the highest rate debt first, however, this wasn't always the case. With the 2010 credit card rules, the credit card issuers must apply new payments to the highest rate debt first.