Credit and Credit Cards – What Students Need to Know
Understanding how credit cards work
Credit cards are great tools for convenient shopping, loyalty rewards, and building your credit history, but you have to use them responsibly. Before you decide whether getting one is a good decision for you, it’s important to understand a how credit cards work.
1. When you buy something with credit, you are borrowing money
Buying on credit means you are borrowing money in order to make a purchase, and you agree to repay this money at a future date. Unlike paying with your debit card, when you pay with your credit card, the money doesn’t come out of your bank account right away. Instead, you are borrowing the money from the credit card provider and are not required to make any payments until you receive your credit card bill.
It is important to remember that your credit limit is not extra income, it’s money have to pay back. A credit card is a convenient way to make purchases, but you still have to stick to your budget!
2. Paying the minimum vs. paying the balance in full
Every month, you will receive a credit card statement that itemizes all of the transactions you made in the billing period. These transactions on their own may seem small, but they can add up quickly. In order to remain in good standing and avoid additional fees and penalties, you must make at least the minimum payment on your balance owing. This can range depending on how much you charged to the card. Paying the minimum payment will help you build good credit history, but you will still be charged interest on the remaining balance.
What else do you need to know about credit cards? Here is the full list