Credit Cards: A Brief Starter Guide

Credit Cards: A Brief Starter Guide
  • Opening Intro -

    Credit cards can be your greatest friend, or your very worst enemy.

    Researchers have found that the average credit card debt is $7750, but if you let this amount of money sit for too long it can turn into five digits faster than you think.

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Credit cards are the most popular forms of consumer credit in the U.S. Cards have a dollar limit, which one can spend up to until they’re cut off.

Every month, the card issuer sends a statement with how much has been borrowed. The holder has approximately a month (depending on how long the grace period is, this varies by card) before interest is assessed.

If you pay only the minimum payment, it will not effect the payment history bit of your credit score but the interest will hit you like a truck. The average interest rate is somewhere around 18% APY and this is a lot to pay off.

Credit cards can be your greatest friend, or your very worst enemy. Researchers have found that the average credit card debt is $7750, but if you let this amount of money sit for too long it can turn into five digits faster than you think.

Choosing a Card

If you’re looking into getting a credit card, note that this is a personal decision. If you can’t afford to pay off your credit card balance, then no credit card at all will be right for you. A debit card may be a better decision for you instead.

Choosing the Right Credit Card | $ave Me! | CNBC:

If you do pay off your balances, a card with a strong cashback program or a travel rewards card may be a good option, but take care to do a significant amount of research as credit is a tool; useful in one’s hands, but deadly in another’s.

If you’re a young person, you may have very bad or zero credit entirely. A terrific way to start building your credit up safely is a secured credit card. A secured card is one where the limit is secured by a deposit in the bank. Quite literally, if you want to have a $1000 limit, you give $1000 as a collateral and they’ll only take from it if you default. This is one of the first, easiest ways to build up your credit score.

Once you obtain your secured card, you can begin to build up a history of on time, full payments. Demonstrating that you can handle the payments successfully will allow you to upgrade to unsecured cards, a big level up!

Myth vs. Reality

A popular idea floating around is that you should always carry a small balance because there’s some sort of benefit you obtain. This, is untrue, but there is very much a benefit to using your card routinely for your purchases and paying off the balance each month after the statement is generated.

Making your payments within the grace periods is great because the balance is reported to credit agencies but you don’t get charged any interest…if you’ve already paid the last months balance in full.

Be careful with credit, and it will serve you well for years and years to come.

Learn how to best manage your credit card use and to maximize card awards:

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Categories: Credit Cards

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