What is a credit card?

A credit card is a plastic card issued by a financial institution that allows you to borrow money to make purchases.

How does it work?

When using the card, you are using borrowed money from the financial institution. The credit card pays the merchant on your behalf, and you agree to pay them back

What is credit limit?

This is the maximum amount you're allowed to borrow on your card. It's based on your creditworthiness, income, and other financial factors.

What is the Minimum Payment?

The smallest amount you must pay back each month. Paying only the minimum can lead to high-interest charges.

Building and Maintaining Good Credit:

Credit Score:

Your credit score reflects your creditworthiness. Paying your credit card bills on time positively affects your score.

Credit Report:

Regularly check your credit report for errors. You're entitled to a free annual report from each of the major credit bureaus.

Using Your Credit Card Wisely:

Budgeting:

Create a budget to manage your spending. A credit card is not free money; it's a tool for convenience and building credit.

Paying in Full:

Ideally, pay off your balance in full each month to avoid interest charges. This helps build good credit and saves you money.

Interest Rates:

Understand the APR (Annual Percentage Rate) on your card. It's the cost of borrowing money. Lower APRs are better.

Fees:

Be aware of fees such as annual fees, late payment fees, and cash advance fees. Choose cards with reasonable fee structures.

Security:

Treat your credit card like cash. Keep it in a secure place, and report any lost or stolen cards immediately.

Choosing the Right Credit Card:

Types of Credit Cards:

Explore different types like rewards cards, cashback cards, and secured cards. Choose one that aligns with your spending habits.

Annual Fees:

Some cards have an annual fee. Consider whether the rewards or benefits justify the cost.

Introductory Offers:

Many cards offer sign-up bonuses or 0% APR for a certain period. Understand the terms and conditions.

Monitoring Your Credit Card:

Online Banking:

Enroll in online banking to monitor your transactions, check your balance, and make payments.

Statement Review:

Regularly review your monthly statements for errors or unauthorized transactions.

Responsible Credit Card Use:

Emergency Fund:

Don't rely on credit cards for emergencies. Build an emergency fund to cover unexpected expenses.

Communication with Issuer:

If you're facing financial difficulties, contact your credit card issuer. They may offer assistance or hardship programs.

Remember, responsible credit card use can help you build a positive credit history, which is crucial for future financial endeavors such as buying a home or a car. Always make informed decisions and stay on top of your finances.