When to Get a Credit Card

“We at Chrysler borrow money the old-fashioned way. We pay it back” – Lee Lacocca

Credit is definitely an important term to get your head around, as most (if not all!) of you will own a credit card at some point during your life…

WHAT IS A CREDIT CARD?

Simply put, a credit card is issued to you from a bank, allowing you to borrow funds to pay for goods and services. You must pay this “borrowed” money back in full by the billing date, or you get charged interest, also known as the Annual Percentage Rate (APR), on top of what you already owe the bank.

WHAT ARE THE BENEFITS?

Making purchases with these cards gives you extra protection on what you buy, as both the store you bought from, along with the card company, are jointly liable, so you have a bit more protection in case anything goes wrong!

Often, these bank cards offer various bonuses, such as air miles, helping you secure some cheap (or free) flights!

WHAT IS MY CREDIT SCORE?

A credit score is a number between 300-850, which suggests how “credit worthy” you are. It is calculated from numerous factors. These include previous repayment history, the length of your credit history and total amount of debt, amongst a host of other factors. This may seem like unfamiliar territory, but not to worry, as there are many ways to check whether you are eligible for a card. It is important to note that companies do not issue cards to anyone under the age of 18, so no need to panic just yet! If you want some information on how to keep a good credit score, visit the Practical money skills website here!

TYPES OF CREDIT CARDS:
There are many different types of credit cards to consider when applying, so here is a brief insight to a few of them: Cash Back Cards – Despite high annual fees, cash back cards offer you a % of your purchases back, saving you some money. Travel Cards – These offer air miles/points as you buy, lowering the cost of flights! Student Cards – Helps students to build credit. These cards are low risk, with low interest rates and no annual fees!

Key Terms:

Annual Percentage Rate (APR) – The yearly interest generated by a sum, that is charged to borrowers.

Billing date – Occurs monthly, the date in which you need to pay back the money you have spent on your bank card.

Credit – A contractual agreement between lender and borrower.