Introduction to Credit Cards

 

With great power comes great responsibility. 

A credit card is a powerful financial tool with diverse advantages, especially when building your credit history. At the same time, though, it should be managed very carefully because it may cause you to spend more money than your budget allows. With that being said, let's master the use of a credit card together! 

So what is a credit card, and why is it different from a debit card?

Using a credit card means an amount will be charged to your line of credit, meaning you will pay the bill at a later date, giving you more time to pay. Using a debit card means an amount will be charged directly to your bank account, meaning you pay in real-time. 

When using a credit card you must pay back the borrowed money, any interest accrued, and any agreed-upon fees/charges, either in full by the billing date or over time. Legally, credit card issuers are required to offer a 21-day grace period for unpaid credit card balances before interest begins to accrue. A good habit to establish early on, though, is to pay off balances before the grace period begins.  The grace period is not to cover you if you are late - it's just the time period between when your statement is generated and when the payment is due.  During that period, interest will not accrue on your new purchases as long as you are not carrying a balance on your credit card.

Statistically, students are less likely to have credit cards in their names as opposed to adults. Because young adults might misuse a credit card, there are some other options to start utilizing a credit card. This can be done either by being assigned as an authorized user (no legal responsibility) or a joint owner (some legal responsibility).