By the time you’re an adult you know many things, but many of those things you won’t understand at a very high level of complexity. In fact, most of the things we know about the world are cobbled together from random sources. We learned a few things in school, yes, but much of the information we comprehend about the world was passed on to us through conversation, books, internet posts by strangers, and all sorts of other random sources. You’re right to question your assumptions, given that much of what you know about the world doesn’t come from any authoritative source.
Nowhere is this more true than in the realm of personal finance. For most of us, basic financial skills were not taught in the classroom. Maybe we got some tips from mom and dad. Maybe we’ve learned from trial and error. Unfortunately, this level of financial understanding may not be enough to avoid some of the financial tarpits that catch more people than we sometimes like to think about. Nowhere is this more relevant than in the world of personal credit. All that being the case, here are 3 things that every adult should understand about credit cards.
Credit Cards Have a Huge Influence Over Your Credit Score.
This matters because your credit score will go on to determine whether or not you’ll get a loan for a home and how much you’ll pay for it, whether or not you’ll be competitive for a good job or a desirable place to live, and the rate at which you can borrow money for the rest of your life (or if you’ll be allowed to borrow money at all). When people have way too many credit cards, use more than about 30% of the credit limit of any one card, or otherwise abuse their credit cards, this will be reflected in their score. Credit cards aren’t just about convenience of spending; they are your best steering wheel for building good credit.
Credit Cards Can Be Like Free Money if You Pay Off Your Balance and Get Rewards.
People like to think that a credit card is a way to buy things when you don’t have money. But this is not the best way to use them. The best credit cards have amazing rewards – this American Express credit card for Millennials, for example. A card like that one has fairly high interest rates, but you’ll never pay a penny if you pay down your balance each money. Instead, you’ll get a whole bevy of financial rewards that will let you travel and save in many different ways.
Credit Cards Can Help Pay Each Other Off.
0% interest fees for 12 months, offered as a promotion through various credit cards, is a great way to pay off cumbersome debt you may have accumulated. If you have credit card debt with high interest, transfer it to a card with low or no interest.
If you find out more credit card tips and incorporate the ones here, you will be more sophisticated in your credit card usage than most adults. This will give you many advantages moving forward in your financial life.