Credit Cards

   The first problem is that they are offered to just about anyone. Don’t think that when a credit card application is sent to you that it means you would be able to afford to use it. These card applications are sent to people who don’t even have jobs! Think about that for a minute. The credit card company wants to give a jobless person a card so that they can buy things. How would this person actually pay the money back? The answer is that credit card companies expect you to buy things you can’t afford to pay for, pay the money back a little at a time, and then they charge you interest for using their money.
     The second problem is that when you get a credit card, you agree to pay interest on any money you don’t pay back each month. Some card companies start you out with a 0% rate for six months. This means that you don’t have to pay any interest on money you don’t pay off for the first six months. After that, the interest rate might go up to 15, 16, 20, or even 25% of whatever you still owe. Sure you can buy that flat screen T.V. that you have always wanted for your room. It is “only” $600.00 on sale. Let’s say that you make $100.00 a week working at a fast food restaurant. If you use all of your wages to pay the credit card, there is no way that this bill will get paid off in one month. Your first credit card bill shows the $600.00 amount which is called the balance. The first bill you pay $400.00 which brings your balance down to $200.00. The next bill is $220.00 which includes the interest on the $200.00 you didn’t pay back yet. If you don’t pay all of the $200.00 the next time, more interest will be added. The TV that you got “on sale” can cost you a whole lot more than you thought it would. You shouldn’t buy anything on a credit card that you can’t repay in one month.
     The third problem is how easy it is to use the card when you run out of money. You can even borrow cash on the card. What the credit card companies don’t bother to say is that you can borrow cash but it’s going to have a fee added for doing it. Then if you don’t get your payment in on time, more fees. Some cards even have an annual fee just to have it. You might not pay for the first year, but every year after that you get charged $100.00 just to have the card even if you don’t use it.
     Another problem is that credit cards have limits that the credit card company puts on them. This means that your first card might have a limit of $500.00.   You can have a balance of no more than $500.00. Since credit card companies charge interest on money you DON’T pay back, they will keep raising your card limit when they see that you are paying back your debts on time or paying the amount that you owe each month. The longer it takes for you to pay back the money you borrowed, the more money the credit card company gets from the interest they charge.
     Since you are on this site because you need information and good advice, we have to say that credit cards should be well thought out before you ever get one. Have a reason for having one and a way to pay back the balances you put on it. For example: Let’s say you are going far away from home to college. Your parents feel that you should have a credit card in case you ever have to buy a ticket to get home in case of emergency or to refill your food card (which could be an emergency, too). The credit card will be in your name, but your parents would pay for the emergency charges on it. This kind of card would be a good use of a credit card. Another example: If you were younger than 18 years old, had all of your money in a savings account and wanted to be able to buy clothes when you wanted. You would pay the credit card by taking money out of your savings account. This sounds like a very good idea except that it would be too easy to get carried away. You might be in a store and find the perfect prom dress. It is magnificent and on sale from $500.00 down to $300.00. Wow! That’s almost half off! You realize that your savings account only has $200.00 in it but your birthday is coming and your aunt always gives you $100.00. You think that this is going to work out great until you find out that your aunt gives you a lovely sweater instead.
     We checked the average debt that people have when they graduate from college. It is about $20,000 to $30,000. Now imagine that you have charged $15,000 on your credit card. You start out your adult life in debt. It is EASY to get into debt and really HARD to get back out. Each person has something called a credit rating.   A credit rating is based on how much in debt you are and how you pay back the debt. People who don’t pay balances on credit cards, car loans, house payments, etc. have low credit ratings. This might sound like it’s no big deal but credit ratings are used by people who might loan you money for your first house or car.   For this reason, we do NOT recommend credit cards for anyone under 18 years of age. For anyone 18 years of age and older, use credit cards responsibly. Here are some tips:

	Never buy anything that you can’t afford now but think you can afford later.
	Always pay off your balance each month. If you can't, then you bought things you didn't have the money to buy. You need to stop using the credit card until it is totally paid off.
	Avoid paying the minimum amount. Each bill will give a minimum amount that you need to pay. If you pay that amount each month, you are really only paying a part of your balance and the interest you owe on the whole debt. You don't actually pay much on what you owe. It takes forever to pay off the debt and ends up costing you an amazing amount of interest!
	Avoid borrowing money on a credit card. They charge you extra money to do that. It also means that you are spending more than you are have.
	Avoid late payments. Each bill will have a ‘due date’ when your money needs to arrive at the company. Make sure you leave a few days for the payment to get through the mail and to be subtracted from your account. If you will be late, sometimes you can pay it online by going to the company’s website. Always remember: Late = about $30.00 in extra charges.

     Keep track of what you buy or spend using the card. It’s easy to buy something small and then forget you did. Lots of small things can add up to one large credit card bill!
     Think about a prepaid credit card. These cards look like regular credit cards except that you buy them with a certain amount of money on them. There are lots of these available by cash registers at stores. Some are store cards that are only good at one store. Others are general credit cards that can be used anywhere. These cost extra money to buy but are sometimes reloadable. For example: You spend $100.00 to buy one and the card itself costs $5.00. You would pay the cashier $105.00. Then you could spend $100.00 at one time or spaced out over many shopping trips. Let’s say you bought something for $110.00 and used the card. You would use the card and have to give the cashier $10.00 more. If it is a reloadable card, you can add more money to it. There will be a phone number on it to let you know how to add more money. The good thing about cards like this is that you are spending money you have right now. You are not spending money that you will be billed for later. You can’t overspend with the prepaid cards because the card itself has a limit.

Charge cards are almost the same thing as credit cards. You use them the same way as credit cards and they look the same. The main difference between the two is that credit card companies charge interest, but a charge card doesn’t. The charge card must be paid in full when the bill comes each month. With a credit card, you don’t have to pay the full bill all at once. You can make partial payments.