How do credit cards work?

Question

What knowledge should I have before applying for my very first credit card?

Answer 1

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Answer 2

If you are going to utilize a credit card, know this one major fact about using plastic...it is money out of your pocket whether you sometimes want to believe it or not. The money that is linked to that plastic card is a loan from a bank. It is not free, and it has interest tacked onto it. It is not yours, therefore the money you use through that card, you will need to pay back. So you need to keep in mind just how much your budget allows for you to actually be able to utilize the card, because every month there will be a bill to pay. And paying the card balance on the bill itself will only pay the principle off, it will not even touch the interest that is accruing every month. So be careful of what you purchase if your choose to use a credit card, and make certain your monthly budget can handle it. If it cannot, do not purchase it; otherwise say a $500 purchase of a TV will wind up becoming near $1000 or more by the time it paid off if you only pay on the principle plus interest.

Personally, I loathe the things. I had many, and I got in trouble big time with them. They are easy to abuse if you are not conscious of what you are buying, and keeping a log of what you buy with it like a checkbook. Credit cards provide a false circle of income that really is not there. And honestly, they do not offer any more secuirty when it comes to purchasing cars or homes in the future if you have found a way to make certain you have cash to become your main source of income. Because at the end of the day when you go to purchase a car or home with cash (if you have it in the bank), they could care less what your credit score is. Cash speaks louder than any credit card, always remember that. So above all else, even above my advice listed above...if anything, find a way to make the cash. Find a way for yourself to live without using credit cards or loans. Find a method that will provide you (and your family in the future) the means where you don't have to rely on others (banks, credit cards, etc) to make it in life.

Answer 3

Since getting a credit card is innevitiable, and you already know that you have a spending limit you cannot exceed, you should approach your new found wealth with strategy and planning. Credit Cards exist in the mutually agreed-upon, made up world of Credit. The higher your credit score, the more likely banks will give you a loan or a bigger creit card. You will lower your credit score by doing things like paying bills late, bouncing checks, etc. You raise your credit limit by paying it back on time, or even faster. So here is what you do; buy stuff you need or want on your credit card, but immediatly pay it all back. Don't pay the minimum payment, interest acrues and it also is less impressive to anyone observing your account history. If you pay it all back right away, you score will go up quickly. Just things to keep in mind. ;)

Answer 4

You will have several factors to consider in choosing a credit card. I recommend choosing a major credit card such as a Mastercard or a Visa. I don't like Discover because of their billing terms, and you can get MC or Visa that pays equal or greater cash back. You want to examine the terms of your agreement. You don't want to be paying any sort of annual fee. A few cards still have them, so be on the lookout. If you can find a card that offers rewards, that's great, but it may be more difficult to get one of these cards your first time. I pay my credit cards off with every bill. In this manner, I never pay any interest or finance charges. The credit card just lets me put off paying my normal expenses. If for any reason, you anticipate that you would not pay off your credit card each month, then DON'T get the card. If you ignore my warning, then make sure you get a card with a very low interest rate. Otherwise, you are going to pay way too much money to use the card.

Answer 5

The way it works is they predict people won't make their payments fully so they earn interest. It's good to pay off your balance every month, but that's not always easy. But do that as much as you can. Although, it is quite ironic that this is how credit card companies get paid. So if everyone did make their payments, there wouldn't be need for credit. But hey, we're in America, the shopping-est country in the world.

Answer 6

good for you...here's the basics
1. you purchase stuff (not going over your credit line)
2. you get a bill (for your purchases)
3. you pay the bill (or else!!)

If you really want to know the details...go check out some credit card websites...Visa, Mastercard, American Express, etc.

It's better to have a check card so you can make purchases from your checking account but that's just what I think...

Answer 7

Look at the back of the application. Check annual fees, whether a deposit is required, interest rates...read the entire thing. Several times. Have someone else read it to you. Out loud. Then read it again.

Answer 8

find the lowest interest rate and make sure there isn't a yearly fee. also- never just pay the minimum balance, its awful for your credit. just pay the whole bill everytime you get the statement.

Answer 9

They're the next best thing to the five-finger discount.

You take now, don't pay for anything, and pay up a lot later and get slammed with fees.

Answer 10

Be aware, credit card money is not free money... u have to pay it back. Charge only the amount you currently have... it is borrowed money!

Answer 11

Its a dangerous world if you dont watch what you spend..It may seem you havent spent alot but when that bill comes in..its like "WoA!".
Have a good..Steady job..and dont go crazy. Keep up with what you spend..keep tracked.
Other then that..its a good thing!