• "bank cards", issued by banks: Visa, MasterCard, and Discover;
• "travel and entertainment (T&E) cards" like American Express and Diners Club;
• "house cards" that are good only at the stores of one chain. Sears is the biggest one of these, followed by the oil companies, the phone companies, and your local department stores.

T&E cards and national house cards (like Sears) have the same terms and conditions wherever you apply.(return to Index)

What is an affinity card?
An affinity card carries the logo of an organization in addition to the emblem of the card. It is typically a Visa or MasterCard.

Card users receive some sort of benefit by using the card-- frequent flyer miles or points toward merchandise in a catalog. The organization solicits all its members to get cards, with the idea of keeping their name in front of the card user and, hopefully, keeping the card user loyal to them for future purchases. In addition to establishing brand loyalty, the organization receives some financial incentive-- a fraction of the annual fee or the finance charge, or some small amount per transaction, or a combination of the two-- from the credit card company. Seldom does the organization get much money out of it. Most of the profits go to the card issuer. The credit card company gets more of their cards into customers hands. Everybody wins.(return to Index)

Is MasterCard better than Visa or vice versa? What about American Express, Diners Club, etc?
In the U.S., almost any establishment that takes MasterCard takes Visa, and vice versa. If you're going to be doing all your spending in the U.S., you may not want (or need) both cards.

In Europe, things are a bit different. In some countries, the Visa and MasterCard networks have been merged and ALL merchants who take one take the other. This is notably the case in France. (But sometimes the merchant isn't aware of this until you point out the M-C logo on his sticker in the window.) On the other hand, the cash advance networks have NOT been merged. Again, in France, almost any bank or cash machine (if you have a 4-digit PIN) can give you a cash advance on Visa (Carte Bleue), but only a few banks (Credit Agricole, Credit Mutuel, and all Post Offices) and cash machines can give you a M-C cash advance. Also, for various reasons, a given card may not work on the day you most need it. And in many countries (e.g. Italy), the networks have not merged. Thus, it is most prudent to have both.

American Express, Diners Club, and their kin were originally aimed at the more upscale "travel and entertainment" market. They are accepted at many places, though not as many as Visa and MC. Some places don't take MC and Visa but do take American Express or Diners Club.

In Europe, there are increasingly few places that take only Diners Club. There are a very few that take American Express exclusively.

Note that credit card usage and acceptance varies widely across Europe. In France, you can use it at MORE places than in the US. In Italy, less in general, except for tourist-oriented shops. In Germany and England, about the same. In Greece, only in tourist-oriented shops.

The American Express card used to be very handy for traveling in Europe. Among other things, it would let you cash personal checks drawn on your U.S. bank at any of their many offices. Nowadays, however, with your Visa or MasterCard, you can get cash advances at local banks at a better exchange rate.

AMEX also holds mail for their customers at their offices so if you don't know where you'll be staying in Istanbul, you can have mail sent to the AMEX office. (It's enough to have one $10 AMEX traveler's check to be considered a "customer".)

I don't have an AMEX card, but someone who does posted a list of the benefits he had actually received in a year and concluded that the card was worth more money to him than the annual fee. He cited student and non-student discounts for air travel, extra frequent-flyer miles for a variety of airlines, and "twofers" at some big-city restaurants. Your benefits may or may not outweigh the cost of the annual fee depending on your usage patterns.

The best card for you is the one that is accepted where you shop and charges you the least amount of money for the services you actually use. For example, if you always pay off your balance each month, it is important to get a card with a grace period; the interest rate doesn't matter much. (return to Index)

Why does my neighbor's MasterCard or Visa have different rates and fees from mine?
MasterCard and Visa rates are set independently by the banks issuing them. In fact, a given bank may offer several different rate and fee schedules. Sometimes you can pick which one you want; other times the bank will offer you a single set of terms with no option, even though it offers another customer a different set of terms. That's why it's worth shopping around rather than just applying for "a MasterCard" or "a Visa."

This is not true of the T&E cards. One American Express green card is like all other American Express green cards in the country. (Corporate AMEX cards may vary from individual ones.) (return to Index)

What is a secured card?
Secured cards require you to make a bank deposit up front. The limit on the card is usually related to the amount of the bank deposit. The bank has the right to take money from your deposit if you don't pay your bill.

Secured cards are usually sold to people who have credit problems and can't get a regular "unsecured" card. But a secured card from a bank may be a good deal for anyone.

A secured MasterCard or Visa looks just like a regular one and the law ensures that it has all the same consumer protections.(return to Index)

What is a guaranteed card?
A guaranteed card is the same thing as a secured card but it is typically offered through 900 numbers. Though technically legal, these are not a good deal for the consumer if they carry an application fee or a 900-number charge.(return to Index)

What is an unsecured card?
You probably won't hear this term often because it is the norm. A "regular" card is unsecured. "Unsecured" means that the bank can't take specific assets of yours in the event that you don't pay your bill, but rather would have to sue you or force you into bankruptcy to collect. (return to Index)

What is a debit card?
As its name implies, it is not a credit card. Instead of running up a bill that you pay at the end of the month, the debit card runs down your checking account at the moment the sale is made. Merchants like these because they get instant payment without worrying about bad checks.

Debit cards are convenient but they do have drawbacks. It is a lot more painful to resolve a problem with a purchase if the money is gone from your account (as with a debit card) than if it's just numbers on a piece of paper (as with a credit card). And if you lose a debit card, your whole account can be emptied with no recourse for you. You decide whether you want to take that risk.

A reader has reported that his Schwab account has a debit-type card associated with it, but it is treated like a credit card for other purposes. In other words, it is a credit card, but the debit is made immediately to his Schwab account.

Consumers in the know don't like debit cards because they offer less protection than credit cards in the event of a billing dispute.(return to Index)

How does an ATM card differ from a debit card?
An ATM (automatic teller machine) card is a form of debit card but you use it in a cash machine by punching in your code number. Clear as mud? Try this: a "debit card" looks very much like a credit card and is treated like a credit card by most merchants but the charge is immediately deducted from your checking account. An ATM card looks nothing like a credit card, has no Visa or MC logos on it, and is only good for making cash withdrawals from your checking account at cash machines. Better?

The ATM card is a little less dangerous if you lose it, since nobody can use it to drain your account without your PIN (personal identification number). Also, most banks limit the amount of cash that can be withdrawn with an ATM card in a day. (A Visa or MasterCard debit card allows a thief clean out your entire account with one purchase.) (return to Index)

What is a PIN?

A PIN is a password that goes with your card and allows you to make certain types of electronic transactions involving your card. In some countries (notably France), most credit card purchases are validated with a PIN. (Although you can still use your card without one, they may sometimes have to phone for authorization.) Also, if you have a PIN, you can get cash advances from many cash machines. Note however that it is best to get a 4-digit PIN; longer PINs are not accepted by some networks (notably the French).

Also, protect your PIN as if it were cash. Do NOT write it down anywhere near your card. With this number, and your card, a thief could run your card to its maximum in cash advances. (return to Index)

What are some common credit card terms?

Annual Fee A flat, yearly charge similar to a membership fee

Annual Percentage Rate (APR)
A measure of the cost of credit that expresses the finance charge, which includes interest and may also include other charges, as a yearly rate.

Finance Charge
The dollar amount you pay to use credit. Besides interest costs, it may include other charges associated with transactions such as cash advance fees.

Grace Period
A time, about 25 days, during which you can pay your credit card bill without paying a finance charge. Under almost all credit card plans, the grace period only applies if you pay your balance in full each month. It does not apply if you carry a balance forward. Also, the grace period does not apply to cash advances.

Interest Rate
Interest rates on credit card plans change over time. Some are explicitly tied to changes in other interest rates such as the prime rate or the Treasury Bill rate and are called variable rate plans. Others are not explicitly tied to changes in other interest rates and are called fixed rate plans.

How do the credit card companies calculate your credit card interest each month?
To calculate the interest on your card each month, the lender multiplies the card's interest rate (the APR) times your card balance. This will give the interest for the entire year. The lender will divide this interest calculated by the number of months in the year, or 12. The sticky part is calculating the credit card balance. This is why it's important to choose a card with a grace period (see last question). If you do have a balance on your card, there are three methods of calculating it:

average daily balance
With average daily balance (the most common method), the issuer calculates the balance by taking the amount of debt you had in your account each day during the period covered by the billing statement and averaging it.

previous balance
With this method, the issuer uses the balance outstanding at the end of the previous period-- that is, the period prior to the one covered by the current billing statement.

adjusted balance method
With this method, the balance is derived by subtracting the payments you've made from the previous balance. (return to Index)