Saturday, 18 May 2019

How Your Credit Cards Work - Important Things You Need To Know

How Your Credit Cards Work - Important Things You Need To Know

Most of the time when people tell you not to use a credit card, any time the reason is actually valid, they 're just trying to help you out, but it's also true, maybe they are telling you this because they got themselves into trouble and they didn't use it the right way.

A lot of time when it comes to the bad side of credit cards it's because people don't use them responsibly and the error lies with the user, I don't mean to come across that way, but it's true,

You know, when it comes to money and personal finance sometimes people just don't really think about what they're doing and if they use something the wrong way and they can't really see consequences that are going to come because of that, well, then is going to be a surprise when things go bad.

  • A credit card can make you drown in the sea of debt. They can have a crazy interest rate that's just making you throw away money, that's only if you don't educate yourself on how they work, but that's not going to be a problem because we're learning about it today. They can ruin your credit, but that's if you want to use the credit card that way. 

Understanding How Credit Card Works

When you go to a stop or you buy something online with your credit card, the money doesn't come out of your bank account, it goes onto your credit card balance and you have to pay that balance off at a later date.

You use your credit card, you spend a certain amount of money you will get a bill from a credit card company that says this is how much you spent, this is your 

  1. Balance Owed
  2. Minimum Payment
  3. Due Date

What you do when you make that payment is going to determine whether you pay interest or not, so this is very very important. 


If you pay off the full amount that you spent, you will not pay interest ever.

For example
  • If I use my credit card and I spend $500 a month and I go to make my payment and I pay $500, I will not pay a penny in interest. You can use your credit card for more than 10 years without paying interest.

  • If you decide not to pay off everything then guess what, you will pay interest. If my minimum payment is only $30 and I spend $500, let's say I pay the $30, I'm going to pay interest on that remaining $470.
That's not good, that's not what you want to do, your biggest rule when it comes to using a credit card is to pay Pay Off Your Full Balance! Every single month.

As long as you do that, it won't matter what your credit card interest rate is, seriously my card company could call me up tomorrow and say hey Michael we're going to go ahead and raise your rate up to about a million percent interest, but I really wouldn't care too much

Because think about it, you pay interest on whatever is left over after you make your payment, so because I always pay off everything in full whatever leftover is $0, so what's a million percent interest on $0, is Zero.

That is the main reason why I love them because I pay it all off and I don't pay interest. 




Now you understand how a credit card works, just make sure you always pay off your entire balance every month. If you like our article feel free to like our page.

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