Chapter 8. Using Credit Wisely
"Credit cards are great for convenience, but terrible for borrowing. Either cut them up, if you canât pay on time; orâif you can pay on timeâmake your credit cards pay you.â
You already know that using credit cards carelessly can lead to debt. But did you know that people tend to spend more when they pay with credit? (See the box on Choosing a Card.) Thatâs one of the many reasons itâs so important to think before you whip out the plastic.
Credit cards arenât evil, but they can be dangerous. Just as youâd treat a chainsaw with respect, you need to be careful with credit to avoid hurting yourself. And if you use them wisely, credit cards can actually give you a financial edge.
This chapter will show you how to choose a credit card and use it without getting burned. Youâll also learn how to manage your credit report and find out what your credit score isâand how to boost it.
Credit Cards
First, the basics: When you buy something with a credit card, youâre taking out a small loan from the card issuerâBank of America, Capital One, or your local credit unionâand you owe the issuer that amount. If you pay your balance in full every month, the card basically gives you an interest-free, short-term loan. But if you carry a balance from one month to the next, youâll end up paying high interest rates and fees on top of the cost of Stuff you buy.
Note
Thereâs a difference between a credit card company and a card issuer ...
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