I really want to understand the way "credit cards" work? and best ways in using it?

Answer 1

You are borrowing money every time you use it. If you buy a tank of gas and charge it you owe the money but you can pay it before the grace period without interest. If you don't pay in full on time the interest will be high. Say you owe $1,000 it can cost you about $300 every year just for interest, once you get behind where you carry a balance it can take decades to catch up. Never ever carry a balance and the aren't bad but paying $300 a year interest on stuff you don't even remember is bad. Some owe ten times that much or more. They are the laughing stock of responsible people, an embarrassment to their families.

Answer 2

I know a lot of people said not to get a cc and not to use one if you have one. Well, guess what? Having a credit card that you don't use can actually cost you money too for NOT using it. Lenders often have it built into their contracts as a "fee" for non-usage. So the best way to use it is to charge minimally and pay it off immediatly so you can build your credit. This way, later on down the line, you will have excellent credit and will pre-qualify easily for a home loan. Just make sure you research the interest rates and the contract thoroughly prior to committing to a credit card.

The best way not to use it if you just don't trust yourself is this little trick: Put the cc in a plastic ziplock bag and fill with water. Then put in the freezer. Defrost only after you have given yourself AT LEAST 24 hours to think about what you are going to use it on and if it is a true emergency.

Answer 3

A credit card is just like a loan from a bank except you have the option of paying a credit card in full every month and avoid interest.

The best way to use one is for everyday things like food and gas being careful never to exceed 30% of your credit limit in any given month and pay it off in full before the due date.

This way you will not be charged any interest and the time lapse between the billing date and the due date will show you with a small balance every month. This will establish a good payment history which makes up 35% of your credit score.

I have done this with two credit cards for the last two years and have raised my score over 150-points.

Answer 4

A credit card is just a way of borrowing money when cash is not immediately available. Credit cards can be a good thing, if used with caution. It does help to build credit for larger purchases such as buying a car from a dealership. You can go the route of using only what you can pay off on one bill, especially where cash advances are used. If you choose to make monthly payments on a credit card, be sure to make the monthly payment MORE than the minimum; this helps to bring down your balance better than making just the minimum payment. My best advice to you? Regardless of the credit line you are given, set yourself a personal limit, and don't go beyond it!!

Answer 5

The bank (or whoever) checks you out and then mails you a credit card. Many merchants will let you charge on it. You receive a bill in the mail once a month. If you pay the whole amount due before the due date, there's no problem. If you pay less than the full amount, its like a loan that you've taken out. It can grow and grow and grow if you are not careful, because if you keep spending, and pay less than the full amount, and let interest charges keep adding on, you are basically spending beyond your ability to pay for it. Its addictive.

You have to be able to set a budget and stick to it.

Interest rates on credit cards are very high...like 19 percent per year.

I would advise you to apply for a card. If you receive it, use it carefully and pay it off in full every month. A lot of people on Yahoo Answers believe its more important to establish credit by borrowing, but I believe its more important to avoid outrageously high interest rate charges.

Answer 6

The best way to use it is to treat it as a way to not carry cash with you. So don't charge anything on it you can't pay off at the end of the month.

If used this way, you get some float (the money in your checking account looks good to the bank) while you use the credit card.

You also have an emergency source of funds which you can extend payments on if you need to. Just keep your normal spending in check.

Some accounts give you points or rewards, or cash back - even better.

Answer 7

The best way to use a credit card is DON'T USE IT !
If you do use it make sure you can pay it off in the first billing.

Answer 8

Find very useful info and tips on getting and managing credit cards on http://creditcardmanager.credithelperhom

Answer 9

They "loan" you money, at a high interest rate. the more you use it, the more it will cost you. Have one, and only one, credit card and use it only in emergencies.

Answer 10

Check this site. http://www.1-800BadCredit.com
They are very helpful and have a page on understanding credit.

http://www.1-800badcredit.com/credit-score.html