Introduction
Credit cards are powerful financial tools—but only if you know how to use them wisely. For beginners, the world of credit cards may seem confusing, with terms like APR, minimum payment, and rewards programs. Let’s break it down step by step.
1. How Credit Cards Work
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A credit card allows you to borrow money from the bank up to a certain limit.
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If you pay your balance in full each month, you avoid interest charges.
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Carrying a balance leads to interest, which can quickly add up.
2. Key Terms to Understand
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Credit Limit: Maximum amount you can spend.
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APR (Annual Percentage Rate): Interest charged on unpaid balances.
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Minimum Payment: The smallest amount you must pay monthly (but paying only this leads to debt).
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Billing Cycle: Period between statements (usually 30 days).
3. Benefits of Having a Credit Card
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Builds your credit score.
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Provides convenience and security for transactions.
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Offers rewards like cashback, air miles, or discounts.
Conclusion
Before applying for a credit card, make sure you understand the basics. Used responsibly, a credit card is a valuable tool for building financial health and gaining rewards.
