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This might seem like an ignorant question and I admit I feel stupid for asking it, but I'm really clueless. I know nothing about credit cards and credit. I know, in simple terms, that basically a credit card is a form of payment that allows a person to buy something that is payed later. What I don't understand is why they are so important to have. Can someone explain them to me? I honestly think they make life way more complicated...I mean...why would you want to buy something and have to worry about paying it later? Why not pay for something upfront? It also brings all these confusing concepts like interest rates, loan rates, credit, etc. that I don't understand. I personally don't think I'll ever want a credit card. I'd rather buy something, have it payed and get it out of the way rather than having to worry about having to make payments later on. Could somebody survive throughout life without a credit card? Also, at what age should you get one (if you should), or when do you know when you'll need one?
This might seem like an ignorant question and I admit I feel stupid for asking it, but I'm really clueless. I know nothing about credit cards and credit. I know, in simple terms, that basically a credit card is a form of payment that allows a person to buy something that is payed later. What I don't understand is why they are so important to have. Can someone explain them to me? I honestly think they make life way more complicated...I mean...why would you want to buy something and have to worry about paying it later? Why not pay for something upfront? It also brings all these confusing concepts like interest rates, loan rates, credit, etc. that I don't understand. I personally don't think I'll ever want a credit card. I'd rather buy something, have it payed and get it out of the way rather than having to worry about having to make payments later on. Could somebody survive throughout life without a credit card? Also, at what age should you get one (if you should), or when do you know when you'll need one?
I have credit cards so I can have all of my monthly bills bill to 1 card, then I can pay it off with one check each month, and get travel points.
Can you explain something else to me? How and when did you learn about using credit cards, about all these concepts like "credit", "interest", "line of credit", I feel really dumb that I don't know how all these things work!!
What I don't understand is why they are so important to have.
For others to make money.
The processing of credit card transactions is a business service for which credit card companies charge a fee to businesses. The cost of the card processing fees are passed on to you, the consumer, in the form of higher prices for goods and services.
To get credit you will need a credit card at some point. When you buy a car you will have a car loan, prior to approving you for that loan they will run your credit. If it's good you will be approved quickly and get a lower interest rate, if it's bad or if you have no credit you will either get the loan with a high interest rate or be declined. To buy a house they run a credit check, again without ever having a card and using it wisely it will be very difficult to build that credit.
I wish I could just pay cash for everything, but in today's world the credit card rules. I just use it and pay it, then there is no interest, no fees and if your making a large purchase, like furniture, you don't have to carry that much cash with you.
Can you explain something else to me? How and when did you learn about using credit cards, about all these concepts like "credit", "interest", "line of credit", I feel really dumb that I don't know how all these things work!!
To answer all of those questions would require more typing than my fingers are up too. You need to find someone you can discuss it with, an adult with some worldly experience, perhaps even a banker who might wish to take the time required.
It is a good idea to have one card and use it sparingly, and pay it off at the end of every month. If you pay it off every month, there are no charges. That way you can build a credit rating
A credit card can be a trap that can pull you into a deep hole if misused. It's something I feel strongly that should be taught in school, before one gets themselves in trouble. One late payment can shoot your interest up to 30%, and they have more ways to elevate charges, it boggles the mind.
Used correctly, they are a wonderful idea. Too many people think they can buy anything they see and worry about it later. That thinking will get you in big trouble.
Paying cash for everything is a great idea, if you can. Saving for a goal is exciting. Buying it on credit, and the excitement is soon gone, long before the payments are gone.
Good for you for asking, keep asking questions, and never go into debt you can't afford to pay off at the end of the month.
Do you have a family member or friend who has more experience with credit?
I think it all boils down to this. There are many things in life people want to buy. Some of them can be paid in cash, others are too expensive to pay all at once. Credit allows for a person to pay a debt piece by piece until it is paid off.
Now if you asked me to loan you some money, what assurance do I have you'll pay me back and I can make money (interest) in the process? I don't really because we don't know each other. That's why having good credit is important. It shows someone you want to borrow money from that you can be trusted because you were responsible when someone else gave you a loan. So if you ever want to own a house, buy a car, or a boat...credit is useful.
If you apply for an apartment, get insurance for a car, or even applying for a job....all of these things will bring you credit report in front of someone. It shows how trustworthy and dependable a person is "on paper."
I'm simplifying here but I hope this helps. I'd start small with a simple credit card. Don't use it all the time and always pay off the balance at the end of the month.
I remember when I first got a VISA card as a sophomore in college. I still use the same credit account and I've always paid the balance off.
I have credit cards so I can have all of my monthly bills bill to 1 card, then I can pay it off with one check each month, and get travel points.
BINGO! I do the exact same thing. I pay it off every month using online banking so in reality it's just like using my checking account. I keep track of all my purchases online and know exactly what I'm spending my money on. I probably get about $500-$600 worth of rewards a year without paying $.01 in interest.
Having a credit card also means you can rent a car, get a hotel room, etc. It also provides you peace of mind making big purchases and lets you dispute charges that are not right. Also, it means I carry virtually no cash and if it is stolen or lost and can cancel and any charges will not count against me. One more thing, if you ever want to buy a house or pay for a car (without using cash up front) you will need to have built up a credit history and without credit cards that's not really possible.
Our grandparents lived in a different world. You can't rent a hotel room or a car -- or complete about a dozen other transctions, and I'm sure there are more -- without a credit card. Even if you're going to pay cash.
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