Credit Card Changes & Managing Credit Wisely

Basics

Most teens will not be eligible for a credit card, unless it is co-signed by an adult.  A credit card is a plastic card that can be used to purchase goods and services and then paid for later.  This compares to debit cards (which only allow you to spend the amount you have in the bank at the time of the purchase).  See the section on ATM & Debit Cards.  Credit cards can be issued by banks, credit card companies (such as American Express), savings and loan institutions, retail stores, gas companies and many more.

When you decide to get a credit card, get as few as possible, maximum three.
  • Pay off the full balance of the credit card every month, if possible.  If you can’t, and can only pay off some of the debt, you’ll be charged interest on the balance (the money you owe).  Make sure you make your payments ON TIME.
  • Credit card interest varies and is subject to change.  Read the fine print before you sign up.
  • Look for hidden fees.
  • Some credit card companies charge you annual fees.
  • Most credit cards offer a grace period after the payment due date of up to 25 days.  After that, you’ll pay interest on the remaining balance.
  • Don’t max out your card limit.
  • Your payment history and how much you owe affects your credit score which will determine your ability to borrow in the future (see Credit History & Credit Score (FICO) .
Make sure you really read the fine print before you sign up.  Here’s a great site from the Federal Reserve about credit cards (go to site, click on Consumer Information Brochures, click on Tips for Getting the Most from Your Credit Card:
http://www.federalreserve.gov/publications/default.htm