credit cards (help)  

The concept is simple, the practice of proper use can be difficult.

Basically a credit card is a loan to you from the bank. When you use one you are borrowing the banks money to pay for what you want. If you pay it back before a certain time, the fancy word is amortization period. Then it is just like cash, and you will not incur any interest fees.

If however, you keep a running balance, you will have to pay interest, depending on the card...what ever percentage it is per year, compounded monthly. So, if you have a credit card, and you borrow 1000. And can you can not pay them at all this month, with a 12% interest rate, on month two, you will owe them, 1010, and then you will pay interest on month three on the balance of 1010, instead of the initial 1000. That is what compounded means.

They are a great way to establish credit when used properly, and you use them properly by treating them with respect and rules. The best rule you could have with a credit card, is do NOT use it if you don't have the cash to actually pay for something. Only use it when you could actually pay for that something. Then you never have to pay interest, and you get a high credit score for it.

Sincerely and With Appreciation.

First of all, before you get a card please make sure that:

1. You have a job. You said you wanted to get a student card so I am assuming you are a student. Do not ruin your credit before it gets started by not being able to pay it back. You may think this is silly but you would be amazed as to how many unemployed people try to get cards.
2. You have a savings account....with money in it. Life has bumps in the road it is inevitable. What if you get sick, have an accident or lose your job - that is a very real possibilty in this economy can you pay your current bills? What about that card? If you can't pay both what do you think will be paid first food, lights, water, or card. The correct answer will be all of the above EXCEPT the card. Guess what? If you don't prepare for it that bump will affect you long after it is has passed. Bad credit history lasts for years - yeah, years! Those shoes your buy now can hurt your house hunting in the future.
3. You learn about the nature of credit. Credit is like a bad boyfriend, you can't get rid of it. As a banker, I can check your credit (only if you apply for a loan so don't call your bank asking for your score) and find out if you have been a good girl and paid on time, see all those times you paid a few days late, if you max out your revolving lines, if you applied elsewhere recently and if you spend more than your earn. Use credit wisely. Just because a store will give 10% off doesn't mean you NEED that card and it certainly doesn't mean you max out that card to buy that thing you "just so have to have!!"

If you do get a card make sure you pay more than the minimum balance as that is just your interest. Set up for automatic payments of at least the minimum to make sure you pay on time and when you can pay extra so that you actually get to the principle to bring that balance down. Credit can be good...credit is good but it is like alcohol - moderation and responsibilty is key. You abuse and it can be devastating.