CREDIT CARDS

We know that credit cards and everything that comes with them can be overwhelming and scary. There are so many different types of credit cards and ways to use them. Falling into debt and falling behind on payments by not keeping up with your budget is something that a lot of people fear. Don’t worry, there is no need to fear! Credit cards are not scary when they are handled properly and you are aware of your options. In fact, a lot of the time, credit cards are really useful in helping people out who need to borrow small amounts of money as well as raising their credit scores. 

Over 70% of American adults own credit cards. They are great for when you need a little quick help. But mostly, they are great for building your credit. Let’s learn some more about credit cards! 

Credit cards are not something you need to be afraid of, many people are simply uneducated about the process and the different cards they could come to possess. A credit card is NOT a debit card. It is not full of money that you already own and when you use it the item(s) you are purchasing are not automatically paid for! That is important to remember. A credit card is borrowed money, you are purchasing items with money that you have borrowed from the bank. So, in theory, you can buy something without actually having the money to pay for it in its entirety. When you use a credit card you then pay back the money that you borrowed over the course of the month - at the end of the month. Or, you pay a minimum amount on the total amount. People begin to fall into debt when they borrow more than they can pay back or even not be able to pay back the minimum amount owed on the card. 

There are a lot of different types of credit cards you can apply for and utilize. There are two many types of credit cards; secured and unsecured cards. Secured cards are for people who are just beginning to establish their credit, or who are rebuilding their credit. These cards typically require a deposit beforehand which in many times this becomes the spending limit on the card. This is just a security mechanism for the banks to make sure that they get their money back in case you default on payments. An unsecured card is for something with fair to excellent credit, these are the most common type of credit cards. These cards do not require a deposit and you can freely borrow money with a certain limit or interest rate. These are great for building credit.

In addition to secured and unsecured cards, there are specific cards meant to get you special rewards. Such as travel cards, balance transfers, gas rewards, cash back rewards, retail credit cards, and student credit cards. There are so many different credit cards out there that have different purposes and rewards. It is important to assess your needs and understand what you are looking for when applying for a credit card and what you would qualify for. They are something made to benefit you, not to be overwhelming or scary!

All of these credit cards are beneficial to your credit score if you use them responsibly. 35% of your credit score is made up of your payment history! This means making those monthly payments on TIME. Opening a credit card is one of the first steps you should make when it comes to establishing your credit. Opening those accounts and making faithful payments and will slowly but surely build up your credit! They are nothing to be scared about! Make sure that you budget your spending and keep track of how much you owe, and always pay in full when you can every month. Your credit card will benefit you in the long run and you will gain a lot of financial freedom for yourself. As far as balances go with a secured card (your own money) you want to keep you balance paid off each month. However you still need to use the card and keep it active. With an unsecured card you want to keep your balances under 8% of the limit for optimal scores.

If you ever have questions, contact us - your expert consultants. 

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Solutions Team