Credit
cards provide a way for you to take out a short-term loan. Each time you use
your card, your credit card provider is paying the money up front with the
expectation that you will repay it on a monthly basis.
You can avoid spending more money than you have by paying your balance in full
at the end of each month. If you don't pay the full balance at the end of a
month, your credit card company will charge interest on your loan. You'll still
have to pay the amount due plus the added interest next month.
To get a credit card, you must complete an application that asks for
information about:
* You
* Your income
* Your expenses
The information in your application and in your credit report help lenders
determine how much of a risk it would be to lend you money. If the lender
approves you, you receive a limited line of credit.
Your credit card becomes part of your credit history. Credit bureaus collect
information about how you handle your credit, and make that information available
to lenders, landlords, insurers, and even to potential employers.
If you do not always make your credit card payment on time, future lenders may
not approve loans for you. Even if future lenders approve your loan
applications, they'll charge you more interest to cover their perceived risk.
When should you get a credit card or take out a loan? Think over this decision
carefully, decide when you have enough income and
enough will power to handle a credit card wisely.
Copyright 2012 Credit Union National Association Inc. Information subject to
change without notice. For use with members of a single credit union. All other
rights reserved.