A credit card gives you access to a line of credit and can be used to make in-store and online purchases. (It can also be used to withdraw cash from an ATM as a cash advance, but this option is usually extremely costly.) A credit card is kind of like a convenient personal loan. Every time you use it, you’re borrowing money—the card issuer or financial institution covers your purchase, and then you’re responsible for paying them back at a later date. If you’re not able to pay off your balance in full, you pay interest on your outstanding balance. Most credit cards also charge an annual fee.
When used poorly
A credit card can get you into a lot of trouble. Carrying a balance, spending more than you can afford, making late payments (or worse, missing payments entirely), and taking out cash advances are all damaging behaviors. These behaviors can ruin your credit score, making it difficult to secure future loans, mortgages and even jobs. When used irresponsibly, credit cards are an easy way to accumulate debt.
When used responsibly
If you pay off your balance in full and on time each month, credit cards have a lot of advantages. Credit cards are the only form of payment that builds your credit, which is especially important if you are planning to take out a mortgage or car loan in the future. Most credit cards offer some type of rewards or cash-back program, which can be a great way to offset the cost of a credit card’s annual fee. Beyond the rewards programs, some credit cards also offer additional protection for purchases made on the card (examples include an extended warranty when buying electronics or complimentary travel insurance when purchasing flights). Even if you’ve had the same credit card for a while, brush up on its features and see if there’s a benefit you aren’t currently taking advantage of. Of course, none of these perks have any value if you’re caught in the credit debt trap.
Contact Fort Worth Community Credit Union‘s Member Information Center for any questions you may have about our credit card options at (817)-835-5000.