This is the second part to my adulting series. My last Adulting post we talked about bills and budgeting money. I gave you a few tips on how to manage your money so that you will never have to worry about paying bills. This week we will be getting into credit cards; when people hear the word credit card or credit they get scared. There is no need to be afraid, credit is good for you but if you do not know what you are doing, then you could end up like me. My credit is not the greatest right now because I was 18 and had a credit card and was not ready for that responsibility. Now I am in the process of restoring my credit; I will tell you exactly what to do to ensure you use credit properly. These are things that I wish I would have known when I first started to us credit cards.
What is Credit Card and How it Works?
A Credit Card is a convenient way to pay for things, it is an instant loan. Many people use credit cards instead of carrying cash and going to the ATM. When you have a credit card it is not your money it is a loan that must be paid back. This is where people get in trouble because they swipe their Credit Card and does not have the money to pay it back. When you sign up for a credit card you will receive a limit; this limit is the amount of money that you can spend on your credit card; it is crucial that you never reach your limit unless you are going to be paying it back in full. If you do not pay it back in full it is said that you should have at least 20% of your limit left on the card. When you swipe your card it is your responsibility to pay the money back, you will have to pay at least a limit of $25 dollars each month you want to pay more than that every month. If you do not pay the minimum for your bill then there will be late fees; these are what really get you; you think of I am only 2 days late on my payment it will be fine, you will be charged for that. There is also the interest that you have to pay, the longer you take to pay the credit card off the more interest you will have.
Credit Card Fees and Interest
When you get a credit card there will be fees that you have to pay. The first one could be an application fee you will be charged when you first sign up for the card. Ask for an application fee waiver, the worst thing they can say is no. annual fees are usually used of your card has some type of benefits or rewards. When you are late for a payment there will be a fee that must be paid, it is usually $25-$30. If you want to raise your credit limit there is a fee to do that also, there are many fees that you could be paying for a credit card. When you don’t pay your credit card in full for the month there will be interest added on to your bill. The only way to avoid interest is by paying the bill in full.
How do you build your Credit?
First, you have to get a credit card, when you first sign up for a credit card you credit journey begins so swipe responsible. Ensure that you will be able to pay your bill every month and ensure that it is on time. Know what your credit limit is and check your bank account every single day. There are many credit cards out there, you just have to see which is the best for you. To find the best Credit Card for you check out this questionnaire from Credit Card Insider. If you don’t think you are ready to have a credit card then there are other ways you can build your credit. You can become an authorized user on another person’s credit card; this means that you will not have to have access to the credit card but whoever the primary card owner is will be in charge of paying the bills, while increasing your credit score. Before you become an authorized user ensure that the person pays their bill on time because any activity of the credit card will be on your report. It would be best to use a parent or grandparents card to do this.If you do not know your credit score it is important that you know this information. I use Credit Karma to check my credit score, it is absolutely free. I’m pretty sure you have seen the commercials.
I am not a professional when it comes to credit everything I am telling you if from my own personal experience and research.
Most Important Things To Remember
Get a credit card only after you have done your research
Don’t Swipe your card unless you have the money in your pocket
Try and pay off your whole credit card if you can
If you are not ready for a credit card there are other ways to build your credit.
No credit does not mean good credit
Go to Credit Karma and Credit Card Insider