Credit Card Overview
Have you ever wanted to buy something, and you don't have enough cash? Do you buy items over the phone, or on the internet? Have you ever had an emergency where you needed extra cash? If any of these apply, you may someday want a credit card (if you don't have one already).
A credit card is just what it says - it is a card that gives you credit at stores or other places to buy items. The credit card company pays the store, and then the company charges you the money on a monthly bill. You don't have to pay all of the money back right away, but if you do not the credit card company will charge you interest on what you borrowed from them.
Different credit cards have different features. Some charge a yearly fee whether you use it or not. Some cards have purchase protection - the credit card company will refund your money if something goes wrong with the product you bought with the credit card. Some credit cards automatically give you health or travel or car insurance. Some cards give you 'rewards' with every purchase (such as Air Miles™ or free groceries.) Before you get a credit card it is important that you shop around for the card that suits your needs the best.
To obtain a credit card, you have to apply for it after you turn 18. The issuer will decide whether to give you a card or not, based on your income and credit rating. (They do have the right to say no.) If they issue you a card, they will give you a credit limit. After a period of time goes by you can apply to have your credit limit increased, if necessary. Again, they have a right to say no. Once you use the card that means that you agree with their terms and conditions, and are subject to any penalties if you break one of their rules.
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Definitions Your credit rating is a score given to you by a national agency that keeps track of people's credit. If you have ever missed or defaulted (never paid) on a payment (rent, phone, autopac, etc) that fact will be recorded with the credit bureau. If your credit rating gets too low, it becomes very difficult to get a loan or a credit card - people don't want to lend a person money who has a history of not paying back (for whatever reason!) The only way to increase (or improve) your credit rating is to let time go by, and make all of your payments on time. A credit limit is the most amount of money you can charge to your credit card. Typically, the higher your credit rating, the higher your initial limit. |