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Course: Financial Literacy > Unit 3
Lesson 2: Credit cards- What is a credit card?
- Choosing a credit card: credit card types
- Choosing a credit card: what to look for
- Schumer boxes and the things you should know about your credit cards
- Understanding credit card terms
- Which credit card is better for you?
- Credit cards
- Credit cards: the good and the bad
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Choosing a credit card: what to look for
Learn about how to choose the right credit for you.
Once you are ready to apply for a credit card, there are things you need to consider when comparing across choices.
APR/Interest Rate: One of the most important things to consider is the interest rate, or APR, of the credit card. This is the amount of interest you'll be charged on any unpaid balance. While it's ideal to pay off your credit card balance in full each month, sometimes that's not possible. If you anticipate carrying a balance, you'll want to choose a card with a low interest rate so you don't end up paying too much in interest charges.
Annual Fee: Many credit cards come with an annual fee. This is a fee you pay each year simply for having the card. If you're on a tight budget, you may want to look for a card with no annual fee. On the other hand, some cards with annual fees offer additional benefits that may be worth the cost.
Rewards and Perks: Some credit cards offer rewards or perks for using the card. For example, you may earn points for every dollar you spend that can be redeemed for travel, gift cards, or other rewards. Some cards offer cash back on purchases. If you're interested in earning rewards, be sure to research the specific rewards program to make sure it aligns with your interests and spending habits.
Credit Limit: Your credit limit is the maximum amount you're allowed to spend on the card. This amount is set by the credit card company and is based on your credit score and income. If you anticipate using your card frequently, you may want to look for a card with a higher credit limit so you don't run into any issues.
Other Fees and Penalties: Lastly, be sure to review any other fees or penalties associated with the card. Some cards may charge a late payment fee, an over-the-limit fee, or a foreign transaction fee. Knowing what fees you could be charged will help you avoid any surprises down the line.
Overall, choosing the right credit card comes down to your specific needs and spending habits. By doing your research and considering the factors above, you can find a card that will work well for you.
Where do I find this information?
A Schumer box is a table or chart that credit card companies are required to include in marketing materials and credit card agreements in the United States. It summarizes key information about the credit card, such as interest rates, fees, and penalty charges, in a way that is meant to be easy for consumers to understand. It is named after U.S. Senator Charles Schumer, who sponsored the legislation that required credit card companies to provide this information.
If you already have a credit card, the Schumer box information was mailed to you.
If you are considering applying for a credit card, you can find the Schumer box by clicking on a link that says "rates", "terms", "info", or something similar. Each bank has a different way of naming it. On the other hand, what is listed in the Schumer box is mandated by law, and each credit card issuer is required to provide the following information:
Section | Explanation |
---|---|
APR | This is the yearly interest rate you have to pay if you don't pay your bill in full each month. |
Other APRs | Some credit cards have different APRs for different types of transactions. For example, you might have one APR for purchases, and a higher APR for cash advances. |
Variable rate information | Some credit cards have variable APRs, which means the interest rate can change over time. This section will explain how and when that can happen. |
Grace period | This is the amount of time you have to pay your bill in full before you're charged interest. |
Annual fee | Some credit cards charge a yearly fee. This section will tell you how much it is. |
Minimum finance charge | This is the smallest amount of interest you can be charged if you don't pay your bill in full. |
Transaction fees | Credit cards might charge fees for different types of transactions, like balance transfers or cash advances. This section will explain what they are. |
Penalty fees | If you miss a payment or go over your credit limit, you might be charged a penalty fee. This section will tell you how much it could be. |
Want to join the conversation?
- Credit cards seem so complicated...(13 votes)
- Credit cards ARE complicated. Many things related to growing up are complicated. But most of us grow up, and come to a point where dealing with complexity is just a matter of course. Before you get a credit card, I suggest that you develop some skills in dealing with complexity. With those skills at the ready, you'll find credit cards easier to manage.(31 votes)
- well i have a credit card and i need a schumer box and i didnt get any mail..is there any alternate methods to have schumer box of mine??(3 votes)
- Do this.
1) Verify that your card was issued by a bank headquartered in the USA. That's where the law about Schumer boxes applies.
2) Look on the front of your credit card to verify that it is truly a CREDIT card, not a Debit or some other kind of card.
3) If it is a credit card, then look on the back for a toll free customer service number to call.
4) Navigate your way through the options to get to a kind person who is there to help you.
5) Explain that you never received the mailing that contained the Schumer Box information, and ask that it be sent to you again.(22 votes)
- What is the highest credit score someone can have?(3 votes)
- 850 is the highese credit score.(11 votes)
- My mother always told me that it is better to use a debit card than a credit card to stay away from debt. From a professional's opinion, is this true or does it not matter?(3 votes)
- Your mother has a point. Debt can become something that takes over and controls your life. But demanding that you have saved up the full price before you purchase something can prevent you ever getting a house, a car, a farm, factory or jet airplane.(9 votes)
- what does APR stand for?(4 votes)
- APR stands for Annual Percentage Rate. When you borrow money, the APR is the amount you pay in interest and fees over a year. For example, if you borrow $1000 with an APR of 10%, you need to pay $100 in interest over a year. It can also relate to investments. If you invest a sum of money, with an APR of some x% you earn returns over a year.(4 votes)
- Does a credit limit restrict the amount one can spend within a billing cycle or on one transaction at a time?(2 votes)
- It restricts neither. A credit limit limits how much total overall you can borrow. It could be within a billing cycle if you choose to max it out within the cycle, or it could be over several years.(5 votes)
- Will debt cards have these things too?(2 votes)
- Debit cards seem to work like credit cards, but they aren't. When you use a debit card, you are spending money that you have already put into your account, and you can't spend more than that. When you use a credit card, you are spending the bank's money. The bank is letting you use that, trusting that you will pay it back, and hoping to gain some money on the transaction itself, and on the interest you'll pay if you take your time paying things back.(6 votes)
- what age does your credit start(1 vote)
- I believe your parents/guardians can help you build your credit score by putting you as an authorized user on their credit card. They can probably decrease your score this way as well though.(4 votes)
- What is the highest credit score someone can have?(2 votes)
- For a score with a range between 300 and 850, a credit score of 700 or above is generally considered good.(3 votes)
- Where would you look for a credit card that does NOT offer rewards?(2 votes)
- I might go to the credit union nearest to where I live, and ask there.
But consider, why would you NOT want rewards?(3 votes)