Wed. Dec 8th, 2021
Evan Brooks
Assistant Op-Ed Editor | EB916132@wcupa.edu | + posts

Evan Brooks is a fourth-year Business Management major with minors in Economics and Civil & Professional Leadership.

One of the most important things you can build when it comes to personal finance is your credit. Often falling somewhere between 200 and 800 points, your credit score determines the house you can afford, the car you can buy and much more. Your credit score is mainly impacted by one (often misused) financial tool: the credit card. Technically invented around 1950, the credit card is meant to be a tool with which you can spend money that is not directly linked to any of your accounts. At the end of the month, you then pay that accumulated sum with your own funds. Essentially, credit cards are used to purchase something with money you may not currently have, in hopes you will pay back the total in full on a later date.

Should you miss that payment date, however, you will be charged an interest sum on top of what is already owed. That interest fee for late payments is the cause for a lot of unnecessary debt, not because of the size of that interest per se, but because of the bad habit of spending more money with a credit card than you possibly have.

More on the basics of the credit score: the higher your score, the more you can attain in terms of borrowing, and the more likely it is that others will trust you financially, resulting in better lending rates. Your credit score is mostly determined by whether you are able to pay your monthly credit card bills on time. Should your score be closer to 200–300, you have some work to do. If your score is closer to 500–600, you are about average in terms of score, but if you manage your credit card well and are able to reach credit scores of 700, 800 or even 900, then your goal is to maintain it.

In short, once you get a credit card, spend wisely. Credit cards usually have limits on how much you can spend with them, and good management would be to spend no more than about 30% of your total credit card limit. In terms of how many cards you should have, while each may offer different benefits or bonuses, it is recommended to keep the bare minimum of cards so that you can keep track of your expenses on each of them. A good limit, in my opinion, would be no more than three credit cards at a time.

I am sure we all get those credit report ads when we watch videos, but it is often not the best idea to trust what they say about “free credit reports,” as they are usually not free, whether they use your data or take other actions. Below this article is a link to annualcreditreport.com which gives you a free and safe credit report each year.

Each credit card that you get usually offers rewards, whether airline miles or cash back opportunities. When you get more than one card, maximize the usage of each of their benefits to ensure that your money goes further than it otherwise would.

Lastly, as useful as credit cards are, they can lead individuals down a rabbit hole of debt, should they not understand how to fully use them. If only one thing is gained from this article, it is that credit cards are not free money, and that each expense will have to be paid back, either in the full amount you paid in the first place or far more with interest tacked onto it due to late payments. Credit cards are useful and necessary when it comes to future financial benefits, but realize that they make us more prone to spending. When we look at the money in our wallet, we can see what we have, and are more reluctant to give it away. When we hold our plastic cards in our hands, we become much less reluctant to let go of our money, because we cannot see a tangible asset in our hands.

Free/Safe Credit Reports- https://www.annualcreditreport.com/index.action

Informational Video- https://youtu.be/fle2zwbeVMs

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