Saturday, May 19, 2012

Which Type Of Credit Card User Are You?

From a consumer perspective, credit cards can be a safe and useful way to pay for things, whilst simultaneously building a decent credit score. However, a lenders perspective takes into account what kind of spender you are. Keeping reading to discover what type of credit card user you are and what kind of credit card habits you are associated with.

The Responsible User

If you are a responsible user, you are disciplined and you stick to a reasonable budget. You rarely have to pay interest fees because you tend to pay your balances in full and on time every month. As a result, you have an excellent credit score and never have to pay additional fees for late or missed payments.
Although lenders don't make money from responsible users in terms of interest rates, they still profit because they make money from transaction fees. Responsible users are viewed very favorably by lenders because they can be relied on to pay back everything they borrow, which means that lenders have more funds available to lend to other users.

The Minimum Payment User

Minimum payment users don't often pay their balances in full. They do, however, pay their bill on time each month by utilizing the minimum payment option. Sometimes they pay a little more than the minimum payment, but they usually carry some kind of debt around with them for years at a time.
From the perspective of credit card companies, these customers are very profitable to have around. They rarely pay their balances in full and therefore, they are usually charged interest fees. This is where credit card companies make most of their money.

The Shopaholic User

Shopaholics like to spend. Unlike the Responsible User, the shopping lovers are more likely to exceed budgets and credit limits. They are very likely to accumulate large credit debts that take a long time to pay off.
Credit card companies benefit from this type of user because they can be charged higher interest rates as well as late or missed payment fees. For this reason, any purchases will end up costing considerably more than The Shopaholic User bargained for. Big spenders are advised to stay away from credit cards and opt for cash or debit instead.

The Beginner or College User

Young people, such as college students, often obtain a credit card but have little understanding of how to use it properly. With very little income and only a small budget, the young borrowers could benefit from low credit limits. By charging only one or two small purchases a month to their credit card, beginner users can begin to build up their credit score even if they are not earning much.
From the lenders perspective, beginner's users can be profitable as their lack of awareness can lead them to make costly mistakes, such as using their credit card for cash advances or missing payments. In this way, lenders are able to victimize novices for their innocence and inexperience.

The Former User

If you are a Former User, you probably have a few credit cards which you keep open but, for one reason or another, you no longer use them. This could be due to previous problems with debt or dissatisfaction with credit cards in general, changes in income, or perhaps recognition of the risk of over-spending. Sometimes these users will use their credit cards for emergencies only and sometimes they will never use their cards again. They tend to keep their account open because it contributes to their credit score.
Credit card companies miss these users and often attempt to entice them back with special offers and incentives. This is especially the case if the user was previously a Responsible or Minimum Payment user.

Lenders love credit card users who will make them money. These tend to be those who are vulnerable to high interest rates, such as Shopaholic Users, or those who make innocent mistakes, such as beginners. The Responsible Users, who pay their bills in full every month, help to keep the credit card companies running smoothly by ensuring that lenders have a constant supply of funds to lend out to those they can charge with high interest fees.

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