Read: 1898
Understanding Credit Cards
You might have seen credit cards in action or even own one, but do you really understand how they work? Read on to gn insight into the workings of credit cards, why you might want one, and what considerations to make before applying.
Why Consider a Credit Card?
A debit card offers easy access to your bank account funds by immediately withdrawing them when used for transactions. However, if you prefer not to sp money unnecessarily until your next paycheck arrives, a credit card can be an alternative. Unlike a debit card, purchases made with a credit card don't incur charges right away; instead, you receive a monthly bill from the bank at month's and settle all charges then. Essentially, using a credit card means borrowing money from the bank, which must be repd by the of each billing cycle with interest. However, many cards offer zero interest if you pay off your balance in full during this period.
Building Your Credit
Credit cards are ideal for building your credit score, especially valuable to international students who lack US-based credit history. When you use a credit card responsibly by paying it back consistently monthly, your creditworthiness improves over time. This metric reflects how reliable you are when borrowing money and is crucial for lers assessing loan applications or determining interest rates. A high credit score serves you well throughout college and beyond, making credit cards an excellent way to start building your financial profile.
Watch Out!
Credit cards' advantage of paying later can often lead users into a false sense of security, encouraging oversping beyond their budget. Without seeing immediate reductions in bank account balances following purchases, it's easy to lose track of sping until the -of-month bill surprises you with large charges.
Flure to pay your monthly bill on time or in full may result in steep interest payments, additional late fees, and negatively impacting your credit score. Consistently managing finances and adhering to a budget can prevent unexpected financial strn at month's .
Things to Consider When Choosing a Credit Card
While your bank might offer you the convenience of applying for a card through them, it pays to research extensively to find the best fit for your needs. Options range from traditional banks to other institutions or loyalty programs from rlines, hotels, and retlers that can unlock rewards.
When selecting a credit card, consider interest rates, potential annual fees, foreign transaction fees, and late payment charges. There are three mn types:
Rewards Cards: Offer cash back, store credits, miles, or points redeemable for flights or hotel stays.
Low-Interest Cards: Provide low-interest rates instead of rewards. Some cards offer zero interest during an introductory period.
Student Credit Cards: med at college students with limited credit history. To qualify, you often need proof of indepent income; however, parents can co-sign for approval.
Should You Get a Credit Card?
If you're confident in managing fees and interest rates while understanding the implications on your budget, then obtning a credit card as a college student is advantageous for credit building purposes. A well-chosen credit card adds to your financial toolkit by helping establish creditworthiness that can benefit future loan approvals or lower interest rates.
To explore more resources related to improving financial literacy, visit our Fin Lit Resource Database. Dive deeper into planning and budgeting strategies, expenses common among college students, the ins and outs of credit cards, tax knowledge, giving back, and supporting financial education initiatives.
Explore the realm of sping responsibly through our Sping 101 guide.
Reach out for questions about the Financial Literacy website or Yale College Safety Net.
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
Connect with us on social media:
iTunes
YouTube
Sina Weibo
Tumblr
This article is reproduced from: https://finlit.yale.edu/planning/understanding-credit-cards
Please indicate when reprinting from: https://www.669t.com/Loan_credit_card/Credit_Card_Understanding.html
Choosing the Right Credit Card Type Understanding Credit Cards: Tips for College Students Building Your Credit with Credit Cards Financial Literacy and Credit Management Skills Rewards vs Low Interest Credit Cards Comparison Importance of Budgeting with Credit Card Usage