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Things To Know About Credit Cards Before Getting One

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Things To Know About Credit Cards Before Getting One

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By Logan Sugg

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Please Read Before Going Straight For Content

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Please Read Before Going Straight For Content

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Hi my name is Logan Sugg and i have been doing all kinds of research to learn more about credit cards. I have been identifying advantages and disadvantages of using credit cards as well as learning how they work. The information you are about to read and listen to can be very helpful for you in choosing your next credit card company or even purchase. Enjoy

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First you should understand how a credit card works. The bank allows you to borrow money without needing to pay it back right away however you must make monthly payments. making these monthly payments in full will greatly improve your credit score which will benefit you later in life. however if you begin to fall behind on these payments it can be very easy to forget about them

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Having too many credit cards can create problems. you must remember to pay all of these credit bills when they are due and it is easy to let the spending get out of hand.

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there are many risks being taken when getting and choosing the right credit card. you can add up a lot of debt without even realizing it. there are lots of benefits that come along with it as well like being able to borrow money that you dont have at the moment

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A credit card is a financial tool. Like any tool, it can provide advantages when used well, and disadvantages when used improperly.

lets you borrow money instantly to make purchases

allows you to carry less cash

lets you get cash advances

lists purchases in one monthly statement

helps you establish a credit history and earn a good credit score

provides a free form of credit if you pay the balance in full and on time

provides a convenient payment method for purchases made on the Internet and over the telephone

has limited liability in case of fraudulent use

may offer extended warranty and purchase protection benefits on most credit card purchases, as well as other rewards and benefits.

allows you to build up more debt than you can handle

damages your credit score if your payments are regularly late or you don't repay

costs much more than some other forms of credit, such as a line of credit or a personal loan, when interest charges are incurred.

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4.3.2 Benefits and risks of credit cards

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A credit card is a financial tool. Like any tool, it can provide advantages when used well, and disadvantages when used improperly.

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Credit cards seem like a very good idea. But some may wonder what is the point of having these credit cards because all you may end up doing is paying interest on money you already have and could have paid with your debit card. people often feel the need to use their credit card for buying things when really they should prioritize using the money they already have in the bank. this way they will not have to pay interest and monthly fees.

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Going over your monthly budget is easy to do with a credit card. by using a credit card you may forget about how much you are really spending or overspending on things you want and not things you need. to keep track of things i would write it down on paper and be very aware of where your money is going

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A credit card can be a very good thing as long as you make your payments on time and try to pay in full each month, this will help build good credit. building good credit is very important and can affect many different things you will do in your adult life. purchasing a house is arguably the most important thing to build good credit for. this can help you get better interest rates and mortgage rates

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Benefits of Your Credit Card brought to you by LendUp

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disadvantages of credit card usage (web 2)

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disadvantages of credit card usage (web 2)

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using a credit card can become addictive. the idea of using this plastic card to buy everything seems too simple, too easy. many people can let the spending get way out of hand because they have room on the credit card so they just let it keep adding up without keeping in mind the fact that they must pay this back with interest at some point

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While credit cards are a convenient and secure alternative to cash and checks, they can get you into real financial trouble. Here's how.

Compound Interest Can Create a Debt Trap

In the last section, we said that the ability to delay payment interest free through a grace period is one benefit of using a credit card. The downside of the ability to delay payment using a credit card is that you can delay payment indefinitely. The only money your credit card issuer requires you to cough up every month is the minimum payment. As long as you pay that sum, you can spend your heart's content, up to the credit limit, and take decades to repay the balance. (See Why Making Minimum Payments Gets You Nowhere.)

We don't recommend going this route, because interest charges will make your balance balloon until it becomes suffocating and nearly impossible to repay. Sure, you could declare bankruptcy, but then your credit score will be ruined and it will be difficult to borrow money for years to come. Since some employers check applicants' credit scores before hiring them, it could even affect your ability to work. (Learn how to keep your credit score healthy and your debt under control in 6 Major Credit Card Mistakes.)

The best way to use a credit card is to pay your balance in full and on time every month so you don't go into debt or have to pay interest. Still, sometimes going into credit card debt is the least bad option when money is tight. If that happens, limit your purchases to necessities and make a plan to pay off the debt as quickly as possible as soon as your situation improves.

Plastic Can Encourage Spending

That being said, even if you do pay your balance in full and on time each month, studies show that it may be psychologically easier to spend - or to spend more for the same products and services - when you're paying with plastic than when you're paying with cash. It can be even more tempting to overspend when you know you're earning points or cash back. But credit card rewards, with the exception of sign-up bonuses, are a pittance compared to the interest you'll pay if you carry a balance. They're also a pittance compared to the overspending you might do when you pay with plastic. (Instead of rationalizing, learn how to talk yourself out of buying things you can't afford by reading 9 Reasons to Say "No" to Credit.)

If you're trying to reduce your spending, try paying with cash more often and see how it feels and whether you do in fact spend less.

RELATED: Worst Case Scenario for Credit Card Debt

Late Payment Fees Can Make It Harder to Catch Up

Understandably, credit card issuers want customers to make at least the minimum monthly payment on time. As a result, they penalize customers who are late. Under the CARD Act, the fee for the first late payment a consumer makes is limited to $25, and the fee for each additional late payment within six months can be up to $35.

While these fees are low in the grand scheme of things, for someone who has fallen on hard times and can't even scrape together the minimum payment before it's due, fees can make it harder to catch up. For a customer with plenty of financial resources who has simply forgotten a deadline, late fees are just an annoyance. But they can eat away at your credit score.

High Balances Can Hurt Your Credit Score

Simply carrying a credit card or multiple credit cards will not hurt your credit score. In fact, it can help your credit score, as we'll explain in section 8. But if you spend more than 20% of your credit limit - even if you pay your balance in full - your credit score may suffer because using a significant percentage of one's available credit is considered a risk factor in the eyes of the credit bureaus. (See 6 Benefits of Increasing Your Credit Limit and Is It Possible to Have a Credit Limit That's Too High?)

In the next chapter, some good news: using a credit card responsibly has many benefits.

Credit Cards: Pros of Using a Credit Card

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Credit Cards: Cons of Using a Credit Card

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While credit cards are a convenient and secure alternative to cash and checks, they can get you into real financial trouble. Here's how. In the last section, we said that the ability to delay payment interest free through a grace period is one benefit of using a credit card.

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Many banks will try to persuade you to get a credit card with them by using a rewards system. some may save up points you can spend on things like flights or vacations, while others may encourage using their credit cards for free things like gift cards to your favourite restaurants or places to shop

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credit cards can be very useful in emergency situations. you never really know when something might happen that you need some extra cash to pay for something immediately. this also helps when trying to borrow money. the better your credit score is the less you will pay on interest when taking a loan.

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The Advantages of Credit Cards and Using Credit

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Discover the advantages of credit cards and credit card benefits such as building credit history and rewards with information from Better Money Habits.

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Sorry I couldn't upload the actual word document from my phone (my home computer doesn't have word) so here's a screen shot however I will email it to you as well.