You will want to pay the total amount of the credit card’s statement balance to avoid being charged interest. It is a good idea to establish a credit score, which you can do by becoming an authorized credit card user for a family member or a friend. This will help you build a good credit score to be able to obtain your own credit card. Financial institutions will begin with a small credit line if you have no credit history.
Your Destination: A credit history summarizes your entire credit score. Typically, the length of your credit history is a significant factor in your credit score.
Travel Kit: See Manage Your Credit Card handout. Many financial institutions offer a student credit card for students who are enrolled in classes and are of a certain age.
On the Path: There are several ways to start. Various kinds of credit cards*
Step 1: Secured Credit Card – put down a certain amount; the financial institution gives you a credit card that you will have to pay back month to month. After a specific time, the money will be returned to you. Think of it as saving towards your credit history. Typically, you can deposit a minimum of $300, which will be available to you with your credit card. You must replace these funds each month to keep up the required balance. This means you are “spending down” the $300 you have already put in. Usually, your deposit will be returned to you only after you close the account.
Step 2: Another way to build your credit score is to be an authorized user on someone else’s credit card. You can use it to make your own purchases and the account is reflected in your own credit score. However, you must make a deposit and you can only charge as much as you have deposited. If you default on your payments, the bank will keep your deposit.
Step 3: Do not spend more than you can pay at the end of the month. Monitor your credit score month to month. Complete the handout. *Please note that the information above are just examples of different kinds of accounts. The particulars may vary from bank to bank and even change sometimes. It is up to the consumer to check and compare the rates and restrictions.
Extend Your Journey: It is a good rule of thumb not to overspend; a credit card does not mean you have extra money. If you don’t pay the minimum balance each month, your credit score will be affected, Also, interest will continue to accrue (be charged) on the charges still left in your account. Interest adds up and it can result in interest payments costing more than the cost of the original item.
Learn new vocabulary:
Credit Score – a number assigned to a person that indicates to lenders their capacity to repay a loan.
Accrue – sums of money or benefits to be received by someone in regular or increasing amounts over time.
Expenditure – the amount of money spent.
Resources and Visual Aids: