It seems that in today's world, you can't do the simplest things without a credit card. You can't book a hotel room, rent a car, buy concert tickets, or shop online easily without a credit card. And even then, it seems like you need to carry two different credit cards in your wallet – because not every establishment accepts the same cards. Confusing!
The basic function of a credit card is to let card holders buy the goods they want on a line of credit from the credit card company. For instance, Master Card will lend you $200 for the pair of shoes you want (but possibly cannot pay for in cash the day you want them), and you have to pay back the $200, plus the interests (the fee for borrowing the money in the first place). Credit card companies will typically waive the interest fee as long as the balance (in this case $200) is paid on time.
The first thing to understand about credit cards is that failure to pay your credit card bill can result in bad credit. It's a simple concept. If you spend $200 on your credit card and miss making the minimum payment, you can end up with a black mark on your credit history, which can haunt you when you're trying to secure a loan or another credit card. In order to get a credit card, you typically need to have an established credit rating based on your history of paying bills on time. If you have bad credit, you may have trouble getting a credit card, but there are ways to get a credit card without having credit (no credit history, or if you have bad credit.
Secured credit cards are one way to get around a bad credit problem or establish a good credit rating. Some lenders like Capital One and Master Card offer secured credit card arrangements that allow the borrower to put money on deposit with the lender from 90 percent to 150 percent of the amount of the credit card. This means that if you default on payment, the lender can get their money back. If you make your payments on time, the credit card company will report to the credit bureau that you are trustworthy, which then develops your good standing and can repair bad credit. Make sure you get a secured credit card from a company that reports to credit bureaus!
The best credit card is a paid off credit card. Carrying credit card debt can be a slippery slope, and should be avoided at all costs. If you cannot make the minimum payments, stop using the card, call your credit card company and arrange to chip away at your debt until you are back to good standing. Allowing debt to spiral out of control can be one of the worst mistakes you can make in your life.