All About Credit Cards
August 21st, 2004 - 7 Comments
Do you have a credit card?
If not, you should. A credit card lets you start building credit, which will let you get loans for cars, houses, etc.
“But Ramit,” you might say…
“I already have a debit card. Isn’t that the same thing?”
Nope. A debit card (aka a check card) takes money directly out of your checking account. Even if it has the Visa/Mastercard logo on it, it’s not building your credit.
“How does a credit card work?”
The credit-card company lets you spend money with the understanding that you’ll pay it back (at least some of it) at the end of month. Unlike with a debit card, with a credit card you could have $0.00 in your bank account and you’d still be able to spend. Basically, the credit card gives you a short loan.
There are a couple catches, though: They give you a spending limit (usually $500 or $1,000 for new card holders). They’ll raise this periodically of if you ask them. Also, if you don’t completely pay off your bill at the end of the month, you’ll owe an enormous amount of interest on the remainder, usually about 20%!
Bottom line: Credit cards are free loans if you pay your monthly balance. If you can’t pay it off by the end of the month, don’t buy it.
“What credit card should I get?”
If you’re a normal college student, you probably have 50 of those idiotic credit-card offers in your mailbox. You know why credit-card mailings are so popular with college students? Because they don’t know how to budget and often pay the maximum in interest and finance charges. Throw them away.
Here are some things to look for in a good credit card:
-No annual fee. Don’t pay it. It’s that simple.
-Rewards or rebates. These are getting increasingly popular; you can get a percentage of your total spending back, or get gift certificates/miles from retailers like United, Amazon, Home Depot, etc. I have a United student card myself.
-Availability. Visa and Mastercard are accepted everywhere. Discover is accepted almost everywhere (what’s up Macy’s?). American Express is less so, so think twice about getting one of these.
“Where can I find a list of credit cards?”
You can search and sort through credit-card deals at BankRate.com
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