Credit Cards

What is a credit card?

A credit card is issued by a bank, allowing you to purchase goods or services on credit. Credit cards are accompanied by interest and sometimes fees. They offer a revolving line of credit, which means when you repay the money you borrowed, the balance is automatically renewed.

Advantages of a credit card

Low-cost loans

You can purchase now and pay later

Building credit

Controlled use of a credit card can help you establish credit or rebuild credit.
Purchase protection

Most credit card companies handle disputes for you.
Perks

Depending on your card, you can earn rewards, such as cash back or airline miles.
Emergencies

Sometimes emergencies may lead you to large purchases. If you don't have the money, you can charge now and pay later.

Disadvantages of a credit card

High interest rates

Credit card companies charge you interest on each balance you don't pay off at the end of each month.

Increased debt

If you use your credit card freely, you may find yourself in debt.

Stay in control of credit cards

Use only one credit card
Shop for a credit card that offers the best rewards and lowest interest rates and fees
Consider a secured card, which is a credit card that requires a cash collateral deposit that becomes the credit line for that account
Pay your monthly bills in full and on time
Only charge what you can pay for

Choosing a credit card

When considering a credit card, review the Schumer box. A Schumer box is a reference for fees, interest rates, and other information you'll need to compare credit card offers. Each Schumer box will outline the following:

Fees: Late fees, over-the-limit fees, and other common fees.
Interest rate: Interest rates can range from 6% to 35%. You are only charged interest if you carry a balance on your card from month to month.
APR: The amount of interest that you'll pay annually. A lower APR translates to lower monthly payments.
Grace Period: The time you have before you'll be charged interest.