Credit Cards: How do they work?

A young person recently just said to me, “Did you know that when you pay your credit card bill, you are basically just paying interest?” She looked mortified at the idea. I learned of this early on the hard way when a “friend” stole my credit cards and went on a shopping spree. I paid for a couple of years when one of the companies claimed it was a "domestic dispute". Eventually, I was cleared of the debt. Guard your credit cards and their information always!

Credit cards can be good or bad for your finances depending on your understanding of how they work and how you use them. You need to consider your level of self-control. If a 10k dollar credit limit means to you that you can spend 10k on your next vacation, then you need to be educated or simply do not need credit cards. I am going to explain how credit cards work in a way that would have made sense for me when I seriously needed the advice.

Credit cards need to be paid before the bill comes due each month to avoid interest accruing. Do this and get all the credit card perks without paying interest. If you are responsible at this then you can decide on an amount to spend each month to accrue points.

If credit cards are for you, how do you choose which ones to get? Consider your lifestyle. Are you a big traveler? Maybe an airline credit card would be a good choice for you. Some credit card advice may say that other cards with cash back rewards are better. What is most important is that you compare a few cards before deciding. Don’t let others convince you especially those people at the register saying, “Would you like a 20% discount on your purchase today?” Consider interest rates, credit card fees, perks and credit limits according to your needs. I have a Macy’s credit card only to take advantage of card holder discounts and this is paid off immediately! Peeps, department store credit cards have extremely high interest rates. Take caution with these if you choose to have one.

The way cedit cards work can get much more technical than this, but this is a good start. Let me know if you have any questions in the comments. Later we’ll get into paying off credit card debt. Please follow me on instagram https://www.instagram.com/life_putty?igsh=NTc4MTIwNjQ2YQ==