Ah, the first rush of getting your first credit card. The feeling of holding a rectangular, plastic, card that seems to hold the key to Narnia, or to any magical place that you can think of. Imagine of all the clothes, the toys, and gadgets that you can acquire with the power of credit card.
But wait. You must interpreting credit cards wrong. Here’s a quick reminder that credit cards are not free money that you’re just going to waste in the next hour. Credit cards hold great power, and great power comes with great responsibility. If you’re a teen and have no idea on how credit cards work, then read on. Here’s a newbie’s guide in using credit cards – responsibly.
What are credit cards?
No, credit does not automatically appear to your account. They’ve got to be earned. In case you didn’t know credit is a process in which you loan money from other sources and agrees to pay for it within a certain amount of time. That’s not all. There’s also this thing called interest. Interest is a percentage of the loan amount that the borrower agrees to pay upon receiving the loan.
When you’ve been a good borrower, other companies will trust you and allow you to loan for more. But sometimes, other people get into to trouble. It can be because they haven’t paid the amount that they loan and that they spent too much of their credit.
Pros of credit cards
- It’s fast – Did your laptop suddenly stopped working and you need a new one ASAP. Credit cards are there to help you buy something expensive as quickly as possible.
- Free of interest – Some companies offer products with 0% when you use credit cards.
- Financial backup – Credit cards can be advantageous especially during emergencies.
- Builds credit – Again, using credit cards can help you build a reputable credit history – something that you may find beneficial in the future.
- Monitor your finances – Credit cards are also a great way to monitor your financial activities. It can help you find where your money went and how you can strategize to save up.
- Dispute errors – Don’t you just hate it when the gadget that you bought is not working? Credit cards are a great spending evidences just in case you need to go back to the store for some warranty check-up
Cons of credit cards
- Spending more – The idea of you don’t have to worry about money right now can make you feel like you gave to spend your money right away.
- Fraud is everywhere – When you have a credit card you are more visible to become a fraud victim.
- Hidden costs – Beware. Interest rate is not the only additional fee that you have to pay for. You can also be charged when you pay late or when you exceed your credit limit.
Things to remember when using a credit card
Don’t worry, you’re not alone with your credit card journey. There are ways in which you can handle your credit card more responsibly:
- Ask for your parents’ help. They are your financial advisors and you should often listen to them.
- Choose the right bank. Use ecomparemo.com as a reference site to compare credit card perks and fees.
- Rigorously review your monthly statements. Make sure that you are dealing with reliable companies especially when you’re buying things online.
Having credit card at a young age can teach you financial responsibility and maturity.