Credit Card 101 

Rakstars, do you own a credit card? Just joking, I know you do. Credit Cards have become the fundamental use of payment. There is nothing better than swiping, inserting or tapping. When you receive your goods that you purchased, there is no other incredible feeling than being rich. Yes, you heard it correctly. Richness and credit cards – don’t they go hand in hand. Money you can use whenever and wherever you like. But just like a cheating lover, so can a credit card be. 

We love credit cards because they provide us with security, power, convenience and even more important – rewards. Whether it’s cash back or points, you know it’s better than cash because you are getting something back for using the card. 

Credit Cards are great and are easy to use. If they are lost, you simply report the card and issue a new credit card. It’s easy as 123. On the other hand, cash is risky – if it’s stolen – well it’s gone. Hasta La Vista! Thus, we turn to credit cards but you need to be wary. You can’t go into the relationship thinking that it’s all fun and games, until you see the receipts. Yes you know, your credit card statement. That’s when the truth of the relationship starts to show. 

Before you immerse yourself with your lovely partner aka credit card, get to know what each credit term means. 

Annual Fee

First things first, there can be a fixed cost of owning a credit card, so make sure you understand which credit card you have and if it has a fee associated with it. Don’t worry, not all credit cards do. 

Balance

This is the amount of money that you owe back to the credit card company. Basically, all those items purchased added up and now you are staring at the total cost. From feeling rich you now suddenly feel poor. Who knew that vegan fur jacket was actually $600? But it’s so soft. 

Credit Limit

This is the maximum amount that you can use on your credit card per month. So let’s say the credit card company offers you a credit limit of $3,000, you can spend up to 3,000 and anything over the 3k mark will be declined, so be careful. Good news is that once you pay off what you owe, it will reset to the full $3,000. 

Annual Percentage Rate (APR)

This is where the fun begins. APR is the yearly interest rate that gets charged to your account when you don’t pay the bill on time. Remember you purchase items in one month, you must pay by the next month otherwise you will be charged interest, thus making the items you purchased more expensive. Ain’t nobody gonna give you money for free, boo!

Credit Bureau

No this is not the FBI, but a reporting agency. They collect information on consumer usage of credit. Nothing to worry about.

Introductory offer

This is an interest rate that is normally given to you, when you sign up for a new credit card just as an introductory offer, thus the name. But remember, these rates are normally lower than the standard rate to attract you to join them. Make sure you are well aware of what the actual rate is once you say goodbye to the introductory offer.  

Minimum Payment

You might have seen this at the bottom of your credit card statement. This is the amount that you must pay by the due date to ensure that you are in good standing. However, the remaining amount that you don’t pay – say hello to interest!

Credit Rating

Your credit report card. This is the evaluation of your ability to manage debt. If you ever want to borrow money for big purchases like a house or apply for a loan, this is what they look at before they grant you your wish. 

Just like any Rakstar, maximize your benefits and minimize any costs that you can avoid. 

Rakstars, here is friendly advice, budget and track your spending. Make sure you are able to pay your credit card bill when it’s due. Otherwise, the interest can accumulate and debt can grow like a mole.