Everyone always talks about credit cards. You’ve probably seen the term when buying things online. No doubt you’ve also come across the term on this site! But what are credit cards? There’s a lot to understand about credit cards. So, I’m going to talk about what they are and some of the key things you need to know.
What Is A Credit Card?
Credit cards are a great way for people to spend and, potentially, save money. If you have a credit card, then you’ll be given a certain amount of credit each month. It’s a very easy way for you to pay for pretty much anything you want. Essentially, you’re borrowing money from your bank, in a safe manner. It’s also a far safer way of paying for expensive items when compared to a debit card.
Of course, this doesn’t mean you’re getting free money. At the end of every month, you’ll get a statement detailing how much money you have to pay back. If you can pay it back, then everything is fine and dandy. If you can’t, then you’ll end up generating interest and could end up in credit card debt.
What Is A Credit Score?
A credit score is a number given to you to determine how much credit you’re worthy of having. Lenders will calculate a credit score to make sure that you can afford to pay for the credit they’re giving you. To do this, they look at numerous things, most notably your credit report. Also, they could look at your history, if you’re a returning customer. To get a credit card, you need a decent credit score. This score will usually be set by the bank you’re looking to get your card from.
But, what things can affect your credit score? There are numerous things out there that will make a credit score bad. One of the biggest is if you have a ‘charge off’ on your credit report. What does charge off mean on credit report? Basically, it means the creditor doesn’t think you will be able to pay it back. Having a charge off on your credit report can seriously dent your credit score. You’ll have to work very hard to get it back to where it once was.
What Are Interest Rates?
Interests rates are set to ensure that people will make credit card repayments on time. Your bank will set you an amount of time to pay your monthly bill without interest. But, if you take too long to pay it, they’ll start charging. So, your monthly bill could accumulate interest and keep rising until you pay it back. It’s very easy to get into a pickle if you miss just one repayment. The moment you start gaining interest, that’s the moment you’re in trouble. Missing one repayment can lead you to miss the next months and so on.
If you’re clever and have your finances in check, you should never have to pay interest. Make sure you pay your credit card fees on time, and everything will be okay.