So what is a credit card? A credit card is a small plastic card issued by the bank, allowing the holder to purchase goods or services on credit. This is not like buying things with a debit card because when an item is bought on credit it means that the business will receive that money at a later date. At the end of every month you will be charged for your purchases, as the company that owns the card needs to make back their money. Pay this expense as soon as possible in order to gain, or keep a better credit score. A credit score is a three digit number calculated from a credit report, and a credit score can affect whether or not someone will be approved for a loan from the bank. Your score will also have an affect on other, less important things, such as a second credit card for your business.
A credit card works similarly to a debit card.When purchasing you use the card to pay for the goods or services, but this is the only similarity between the cards. When purchasing with a credit card, you are purchasing on credit, hence the name. Purchasing on credit means that the business you are buying from will receive that revenue later instead of during the transaction. As well you are not paying for the items exactly, but rather the company that owns the card will pay and charge you at the end of the month. Of course there will be tax added on to the final price of the bill because the credit card company needs to ensure that they make a profit as well. Credit cards make purchasing goods easier for those who don't have the money to pay at that moment, allowing them to pay later.
There are many advantages of owning a credit card, but there is just as many disadvantages to owning one as well. Having a credit card can allow someone to pay for goods and services if they don't have the immediate cash on them, and this allows them to pay later. But the credit card company will add tax on the monthly bill, and in the long run you will end up paying way more than the product or service originally cost. Owning a credit card makes it easy to buy in bulk, as the owner may have a business, or the owner is a collector that just has to have that one rare item. But this can easily lead to an overwhelming bill at the end of the month, plunging the owner into dept. The advantages and disadvantages even out almost perfectly, for there is equal opportunity for a credit card user to be responsible or irresponsible. But you may gain better insight on such situations, and plan ahead to be a more responsible credit card user. You can find this information down below
http://www.handsonbanking.org/financial-education/adults/responsible-use-of-credit-cards/
I hope that this blog has been helpful in deciding on whether or not you want to have a credit card. Or at the very least, I hope that you have gained some more knowledge on credit cards, and how they work. We have looked at what credit cards are, how they work, and finally went over the pros and cons of owning a credit card.
Thank you for reading.
Image link:
http://www.diamexus.com/what-you-need-to-know-before-applying-for-a-credit-card/
This blog is very informative and well written! I did not know a lot about credit cards but after reading your blog, I now know how the transaction occurs, and when the company gets the money. I like how you included advantages and disadvantages of using credit cards. This way I know that teenagers don't usually need credit cards because we don't buy items in bulk or things that cost a lot of money. If you do get a credit card,it is important to stay on track with your purchases. I totally agree with the disadvantage of using credit cards, if you are an irresponsible spender, because you will end up getting a bad score and having to pay more than what you spent using the card.
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