For instance if your monthly income is $4,000, and your monthly expenditures are $3,000 you have $1,000 of income to set aside. A card limit of $6,000 gives you the ability to use $6,000 you would otherwise not save up for at least six months. The dangers here are the interest and the inability to make payments that will reduce the balance. Your income in the future is reduced each time you use a credit card, or any other form of debt, because you’re borrowing money that you don't have. A portion of your future income has to go toward repaying your credit card balance, the more debt you are in the harder it becomes to pay off, or even pay down. Continuously using your card while making minimum payments increases your debt and decreases your future income.
Credit card debt is a vicious cycle to get into and tough to get out of Aaron. It can all be avoided by not charging more than you can afford to pay off, and by make payments on time. If used correctly (making your payments on time and keeping your balance low) credit cards help you build a good credit score that you can use to qualify for loans that you might need in the future. When you have good credit, the benefits can include better interest rates on mortgages, auto loans and credit cards, among other things. If you're new to credit cards, it's best to open one at a time and show that you can handle the responsibility each month. Depending on your credit card rate and how you use it, credit cards can cost you hundreds of dollars over the course of a year.
Like most things in life Aaron, there are pros and cons to using credit cards. If you’re smart about how and when you use your plastic, a credit card can prove to be an essential and useful financial tool. If you allow your spending to get ahead of you and you’re not organized when managing payments and accounts, credit cards may do more harm than good. If and when you decide to apply for a credit card, make sure you pick the one that’s best for you.
Hope this us helpful Aaron
There are various credit options available. One is a loan. You go to a financial institution, borrow money, and repay it, with interest, as agreed to.
Another is credit cards. Cards like Mastercard allow you to buy things pretty much anywhere, and agree to pay for them later. Store cards can only be used at certain stores. It's a dangerous thing to do when you don't have much money. Credit cards should be reserved for emergency purchases ( car repairs, etc - things you NEED, not things you WANT).
It's easy to get stuck with a lot of credit payments real easy. You talk yourself into buying a "want" on credit, because it's got a good sale price, for example. Another option is furniture. "No interest if paid in full within 60 months." So you can buy a whole roomful of furniture, and not have to pay anything at all to borrow the money. BUT, if you don't pay it off on schedule, the interest rate is outrageously high, and you end up paying a whole lot for that furniture.
There are of course student loans, and mortgages (home loans). And car loans. It's important as you start navigating the financial world that you find people you trust to ask for advice. Also, please make it a point to distinguish between wants and needs. "reliable transportation" is a need. A 2022 sports car is a want.
Also, you will learn about a "Credit rating." It's like a GPA! It grades you on how well you manage credit. It's pretty weird at times, as it gives you a higher rating if you handle credit responsibly, than if you have no credit at all! With a good credit rating, you can get loans with a lower interest rate. So, you want to manage your credit rating by always paying your bills on time!
hope some of this helps!
at the end of the day I have personally found that if I cannot afford to pay for something I dont buy it!
Credit cards can be a n easy way to get into debt if you are not careful!