A credit card can be an amazing tool. You can not only buy things now and pay for them later, of course, but also build a reputation as a reliable adult, and even make money using them. Yes, people actually make money buying things on credit.
Everyone knows how credit cards work. You buy something, swipe your little plastic square and go home happy, at least for the moment. This is also where many people make a mistake because they forget about their purchase until the bill comes due.
It’s important to remember that a credit card is not cash and will never be cash. That is what debit cards are, and getting used to shopping with a debit card before getting a credit card will help a lot. Debit cards pull the money directly from your checking account whenever a purchase is made, so you can learn how to manage your account and keep track of your money. This will be a wonderful skill when you get a credit card. Instead of forgetting your purchases, you’ll already be in the habit of monitoring your account, and there will be no surprises when the bill comes due.
Card use is also one of the easiest ways to build the credit that can help you down the road as an adult. It is a slow process and takes around at least six months to get your first credit score.
There are three organizations that will give you your credit report—Equifax, Experian and TransUnion. They are required to give you one free report per year, as such that lets you check one every four months, or quarterly. This is very important because every loan you take out, every apartment you rent and every financial need you have requires not just a credit score, but a good one, usually over 700.
The better your score, the more negotiating power, for instance, when you want to buy a car or a house. However, you should be aware that your score is never constant, and a number of things can cause it to increase or decrease. Checking your credit report, applying for a new card and closing an account on another card, or any other number of reasons, can all influence your credit score. However, that should not be a cause of stress. Based on how the system is set up, these occurrences do not cause massive fluctuations in either direction.
One of the most appealing aspects of having a credit card is the ability to make money by spending money. This seems too good to be true, but many credit card companies offer cash back rewards depending on what you buy and where you may shop. To be more competitive with other companies, they also offer special deals or more cash back. My personal card is specifically for students and offers 2 percent back on all food and gas purchases and 1 percent back on everything else.
Along with these bonuses, they also double all cash back I earn during the first year. These percentages seem tiny, but they can add up over time if you are conscientious about where and when you spend money. For example, I no longer use cash, and I make all my purchases on my
card — from a $.99 pack of gum to $500 for textbooks. I am able to earn back some of what I spend because of certain incentives for each of these purchases. While getting cash back is a great reward, you have to be careful to keep track of how much you are spending. This can be difficult, but necessary if you want to be a good steward with your money.
Credit cards, especially for individuals with little or no credit, tend to have extreme interest rates. However, if you keep track of what you spend and are able to pay your bills each time they come due, there is no need to worry about interest.
Sometimes the high amount can even work as an incentive to help you be more conscientious about what you spend by making sure you have the money to back up your purchases so when the bill comes due, you are prepared to pay it.
Credit card companies can only bill you once a month, and they must wait another 30 days, to begin charging you interest. During this time, you must pay off the full amount on the card or they will charge you interest on whatever remains. Many companies also offer apps to help you track your purchases, pay online or through your phone, and give you the ability to “freeze” the card in case you lose it or it gets stolen.
In short, credit cards are great tools that everyone should utilize, but they must be used responsibly. The students of our generation have the ability to take advantage of the system in place in a way that benefits them in the long run. Find a card that gives you cash back and that fits your lifestyle best, monitor the money you spend and pay it off each month. By setting boundaries for yourself and using a debit card first before getting a credit card, you can be a successful credit card user.