Charge Cards, as the name suggests, are cards on which you can get credit i.e. make borrowings (your Charge Card debt). Your Charge Card is a representative of the credit account that you hold with the Charge Card supplier. Whatever payments you make using your Charge Card are actually your borrowings that contribute towards your Charge Card debt. Your total Charge Card debt is the total amount you owe Charge Card supplier. You must settle your Charge Card debt on a monthly basis. So, you receive a monthly statement or your Charge Card bill which shows your total Charge Card debt. You must pay off your Charge Card debt by the payment due date failing which you will incur late fee and interest charges. However, you have the option of making a partial (minimum) payment too, in which case you don't incur late fee but just the interest charges on your Charge Card debt. If you don't pay off your Charge Card debt in full, the interest charges too get added to it. So your Charge Card debt keeps on increasing, more so because the interest rates on Charge Card debt are generally higher than the interest rates on other kind of loans/borrowings. Further, the interest charges add on to your Charge Card debt each month to form the new balance or the new Charge Card debt amount. If you continue making partial payments (or no payments) the interest charges are calculated afresh on the new Charge Card debt. So you end up paying interest on the last month's interest too. Thus your Charge Card debt accumulates rapidly and soon you find that what was once a relatively small Charge Card debt has ballooned into a big amount which you find almost impossible to pay. Moreover, if you don't still control your spending habits, your Charge Card debt rises even faster. This is how the vicious circle of Charge Card debt works.
If you're a college student and over eighteen years of age, you'll soon be encountering your first opportunity to sign up for your own credit card. A number of credit companies will be vying for your business from tables set up in prominent places on campus, offering Frisbees, T-shirts, and other incentives to get you to sign up. But it's something you should think carefully about before you do.
Why do credit card companies do that? College students are notoriously poor most of the time, aren't they, and since they generally don't have jobs, aren't college students considered risky candidates for credit cards? Why would credit companies take a chance on them? And even give them goodies to entice them to sign up?
Interestingly, research has shown that college students actually are good credit risks, and more importantly, students who get a card while in school tend to remain loyal to the first credit card they received. That means long-term repeat business, and profits, for the company that was willing to take a chance on them during their college days.
There are advantages to having a credit card, of course. The first is that prudent use of a card can help build a credit history at an early age, which will help you later on, when you apply for a car loan, future student loans, and even your first home. A good credit history can even give you the edge over other candidates when it comes to getting a job.
A credit card can also offer a certain degree of security in case of emergencies, when you simply don't have the money to address the situation. Carrying a credit card also reduces the need for carrying cash or checks.
But there's a downside to credit cards, too. The most obvious is the possibility of getting into debt beyond your ability to repay. You'll be required to make a minimum payment each month, which usually amounts to 2 percent of your total balance. That may not sound like much, but if you have a $500 balance at 13 percent, it'll take you 69 months to pay off the balance if you make only the minimum required payment. That's a long-term commitment, and makes purchases VERY expensive by the time they're finally paid off.
As a student, out on your own for the first time, the promise of a charge card can be very tempting. It will be easy to obtain, but a charge card can be difficult to manage if not used wisely. Once you have a charge card, you'll be tempted to use it for things other than emergencies, which can snowball out of control, with devastating results.
So before you sign up at the credit card table in the Memorial Union, ask yourself if you really need one, and how you'll pay every month. Also make sure the card has a low interest rate, no annual fees, and a reasonable grace period before you'll be charged late fees. Then, if you DO decide to sign up, use the card responsibly. Credit can move you in a positive direction toward your long-term financial health as the years go by.
Both James Reilly & Jeanette Joy Fisher are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
James Reilly has sinced written about articles on various topics from Finances, Network Marketing and Disease & illness. For more resources from James Reilly visit his main site @ . James Reilly's top article generates over 12100 views. to your Favourites.
Jeanette Joy Fisher has sinced written about articles on various topics from Real Estate, Network Marketing and Real Estate. teaches how to get out from under credit card debt, how to use credit to make money, and six ways to build strong credit to finance your first home and. Jeanette Joy Fisher's top article generates over 135000 views. to your Favourites.