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Financial Literacy
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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What is a credit card?
Learn the pros and cons of credit cards.
What is a credit card?
Credit cards are a type of payment card that lets you borrow money from a bank or credit card company. You can use that borrowed money to buy things at stores, restaurants, and other places that accept credit cards as payment.
When you use a credit card, you're basically making a promise to the bank or credit card company that you'll pay back the money you borrowed. They keep track of how much you owe, and you have to pay at least a little bit back each month.
The bank or credit card company also charges you interest, which is like a fee for borrowing the money. The longer you take to pay back the money, the more interest you'll have to pay.
Why do I need a credit card?
There are a few reasons why people might want or need a credit card. Here are a few:
- It's a convenient way to pay for things without carrying around cash.
- It can help you build credit, which is important if you want to take out a loan or mortgage in the future.
- Some credit cards come with rewards or cash back, which means you can get a little bit of money back for every dollar you spend.
There are also reasons why people might not want or need a credit card:
- It can be easy to overspend and get into debt when you don't have to pay for things right away.
- If you don't pay your bill on time, your credit score can go down, which could make it harder to get a loan or mortgage in the future.
- You'll have to pay interest, which means you'll end up paying more for things than if you just used cash.
Ultimately, it's up to each person to decide if they want or need a credit card. If you do decide to get one, it's important to use it responsibly so you don't get into too much debt.
Want to join the conversation?
How can I build credit as a full-time student?(11 votes)
You can use a student credit card! This can help you build credit history in school so that when you get out of school you have a nice fresh start with a good credit score!(5 votes)
Would it be smart to go your whole life without owning a credit card and simply just using a debit card?(6 votes)
Do I pay my credit card with my debit card? If so then why have a credit card, just use your debit. Credit card puts you in debt. I understand that credit cards give you credit scores but sometimes credit cards aren't as good as they sound. You can get credit in other ways as well.(2 votes)
Well, you have worked that out well, and I commend you. However, when the time comes for you to buy something bigger than the amount you save and access through your debit card (say, a car, a house, or a piece of equipment for the farm or factory you own) or when you want to get a job or rent an apartment, you will need a credit score to shbow the bank, employer or landlord that you are dependable. Use of a debit card does not produce the kind of credit record and score that these people will want to know. So, get a credit card and use it wisely, in a way that will demonstrate your dependability.(2 votes)
i have a question. what score does your credit start out as, before you get a credit card?(2 votes)- When it's new, you have no score. It can take several months of use (charging things and paying the debts) before you have enough of a record upon which to base a score.(2 votes)
- How do I keep my credit score high?(2 votes)
- Borrow, then repay. Don't repay all at once... Stretch things out a few months, and pay on time. That "on time" bit is the best thing you can do to show that you are worthy of credit.(1 vote)
- how do i build credit if i don't have a credit card(2 votes)
- You use what you have to convince a credit card issuing organization to issue you a credit card, then use the card, and pay off the debt over a few months, establishing a credit record, from which a score emerges.(1 vote)
- how to keep up with my credit score?(1 vote)
- Your credit card statement may include a link that will tell you your score each month. If not, phone the customer service number you'll find on the card itself and ask whoever answers there. You may have to go online and pay one of the credit rating agencies to produce and transmit your report to you. In general, so long as you keep up with your payments, your score should be pretty good. Be sure, though, to demonstrate through making your payments, that you are dependable. Paying off your full balance every month may not be the best way to show that.(2 votes)
how do I build my credit score to as high as possible?(1 vote)- 1) Get a credit card account in your name (not a joint one with a parent).
2) Use it to charge an amount that you can comfortably pay off in 90 to 180 days.
3) Make your payments on time (on time is the most important part),
4) Continue using the card, carrying a balance that's not too high, but is also more than zero from month to month. (You'll end up paying some interest, but consider that as the cost of getting a good credit score.)
5) Don't let other things get on publically accessible records about you, like traffic violations or arrests. A credit score takes a lot of other "dependability" issues into account.(2 votes)
This makes no logical sense to me why do we need a credit card for we can just use a debit card to pay things(1 vote)- In order to use a debit card, you must have money in your account. When you use a credit card, you are using someone else's money, and promising to pay it back when you get some of your own. It makes perfectly logical sense to me.(2 votes)
oh astaghfirullah(1 vote)