Six Important Lessons to Know About Credit

No matter your age, occupation, or status, it is important to know about credit cards and the effects they can have on your finances.  Yes, credit cards are convenient with their “buy now – pay later” incentive, but without careful use they could spiral you into debt! According to an article from Fox Business, there are six important lessons you should learn before obtaining your first, or an additional credit card.

  1. Credit cards are borrowed money – The money spent on a credit card is not limitless – it will eventually have to be repaid. Advisors agree that the best rule to follow to avoid overspending is to never make purchases on your credit card unless you can pay them off at the end of the month.
  2.  It is not free – Banks charge money by way of interest and fees to use their credit cards. Before opening a credit card, look around for the one with the lowest interest rate.
  3. Banks are in business – Remember that banks aren’t there to tell you when and when not to use a credit card. They hope that users will spend more money and pay more interest. To prevent excessive use, take out one card and use it only when necessary.
  4. Scrutinize the fine print – Read the fine print and ask questions if you are confused. Here is some of the information you want to look for: yearly fees, balance transfers, online payments and late fees.
  5. Don’t seek happiness at the mall – Don’t use credit cards for your retail therapy. Although cards offer instant gratification for material things, you will not be so happy when you see the bill at the end of the month!
  6. Be responsible – The most important rule is to pay your bill on time. Your personal payment history will be sent to credit reporting agencies. Your payments now will determine your credit score which impacts how much credit you can obtain in the future.

Click here for the entire article from Fox Business. Do you have any other tips for credit card users? Comment below!

19 thoughts on “Six Important Lessons to Know About Credit

  1. This is very well put together. It is very important to be cognizant and responsible with your credit card despite age and status. Credit cards are borrowed money that must be paid back at a timely matter. The sooner you pay off your debt the less interest you have to pay. Banks are hoping you pay back more than you actually spend, so its always best to be responsible and manage your credit card properly.

  2. I definitely agree with Paul on responsibility. Credit cards are a valuable tool that greatly expand an individual’s shopping abilities. However, it is important to stay diligent and keep up with your card payments. Credit cards are made such that one missed payment can lead to a significant increase in personal debt, but if you remain responsible then the debt will never overwhelm you.

  3. I think that it takes a very responsible person to have a credit card. To me, they are very risky and I do not think that they are always necessary, especially for college students. Even though different credit cards have their so called “perks,” I do not think that the benefits outweigh the eventual risk that could take place.

  4. Credit Cards can be a risk factor when it comes to finances and should really be used in case of emergencies. Most people believe a credit card is like a money machine spitting out free money for them to go purchase anything they want. It is dangerous thinking and one that comes back to haunt them in the end and I am glad there are articles like this that tells you to be responsible with your credit card. I think everyone should have at least one credit card, just don’t go overboard with it.

  5. A good 7th rule would be to avoid using credit cards altogether. Debit cards allow you to purchase the same things as credit cards, but they hit your account immediately. This leaves no surprises at the end of the month and allows you to ensure that you can cover the expenses.

  6. Responsibility is the key to having a credit card. Anyone can open on but know how and when to use it can make the biggest difference in successful management

  7. Credit Cards are a lot of times the downfall for people. Even the most responsible people fall victim to their temptation. I agree that it is very important to pay your bill at the end of the month, but I disagree that this is the most important tip. I think that people truly need to keep in mind what they are purchasing, and when they are purchasing it. The article discusses using credit cards for retail therapy, and I know tons of people who have done this, and seriously regretted it. Not only did they have to pay all of it back, but some of them could not. Out of those that could, they had to cut back on a lot of necessities.

  8. I have to agree with Paul. Responsibility is the key to proper usage of credit cards. One does not need to use a credit card for everyday purchases or something you want to buy on a whim. It is however a very useful tool to have in the event of unexpected expenses.

  9. I’ve known too many people, including family member, who used credit cards to make themselves feel better. When you shop emotionally, you justify those purchases emotionally as a solution to feeling bad, then the bill comes and you feel bad, so you go out and spend more. It’s a vicious cycle that I’ve seen happen to enough people to stay away from making the same mistakes.

  10. In today’s economy I believe that credit cards will only become more popular and more used. Personally, the best situation is to just keep people informed on the responsibility’s and important nature of credit cards. Keeping your financial record positive and with good credit is not only extremely important, but necessary to take out loans as wells.

  11. Using a credit card safely all comes down to responsibility. This means that you should know how a credit card works and everything that goes along with it. I agree that credit cards are a great way to raise your credit scores. If you want to make a future loan from a bank, they like to see that you are responsible with borrowed money. But that’s the thing; it’s not your money and you have to pay it back. I also agree that you should not make any purchases unless you have the money to pay it back at the end of the month, or in case of dire emergency.

  12. It is important that people understand that they will need to pay back there debts. Too many people use credit cards irresponsibly when they don’t understand how there credit works. Credit cards should only be used in emergencies, or for extremely expensive purchases that you would not be able to make otherwise.

  13. Before anyone owns a credit card, they need to know these things. Having a credit card without knowing the consequences of using it wrong can ruin someone’s financial situation. Credit cards are borrowed money. Therefore, people spend it without watching their bank account decrease. I think building credit is very important, but you need to make sure you are responsible enough before starting.

  14. This article is extremely important, and I feel that people who are getting their first credit cards should be aware of this. Credit cards are extremely dangerous, leaving people in great debt. I don’t think getting a credit card is a very good idea, especially if you treat it like free money. Also, paying fees and interest just put you into even more debt. If you are going to get a credit card, only use it for one particular thing, like gas, and be sure to pay it off monthly and build up your credit card, don’t get into trouble.

  15. I believe that everyone should have a credit card when they start college to start building credit. But with that said, they also need to be very conscious and keep track of how they are using it so they can pay it off on a timely manner. Students need to be taught that a credit card is not free money but a card that can help you in the future, if you use it wisely, when you want to buy a house or other big purchases.

  16. You have to be responsible when using a credit card but it is a good idea to have one so you can build credit. When you use your credit card make sure you know you will have the money to pay it off at the end of the month and don’t use it if you know you will not be able to pay it off. Also do not open a bunch of credit cards because you will most likely run into problems with debt if you do.

  17. Do not get triggered into all the cool perks such as air flyer miles, disney reward points, etc.. Many credit cards offer buyer programs such as for every dollar you charge is a dollar earned by the credit card company, so teens think if they charge money they will get things back but most of the time the teens end up getting trapped and charge more then they can pay off and never get to use the perks or get them and pay them back in interest.

  18. I believe that proper credit card use comes down to one factor: responsibility. If one is responsible with the purchases they make with a credit card and is diligent in paying off the entire balance every month, debt will not become a worry. If you treat a credit card in the same fashion you do with the cash in your wallet, you shouldn’t have any problems.

  19. In my opinion, credit cards are not worth the risk. Some people would say they have them so they can raise their credit score. I believe a lot of people use this as a way to make themselves feel better. In my opinion, the increase of your credit score doesn’t outweight the risks associated with having a credit card.

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