Credit Cards Explained For Beginners – Your First Credit Card/ Visa Fico

Credit cards can be scary and they should be They are a high APR debt machine that is designed to destroy your finances so if you're gonna dance with the devil we're gonna go over everything that you need to know

Today we are covering topics that range from how to improve your credit to different types of credit cards and best practices First let's discuss how credit scores are determined as right here shown there are two major things that you need to do to improve your credit score and this is pay your bills on time and how much you owe This is calculated about how much you could have taken out and how much you have Length of credit history which is all of your cards and debts that you have accumulated that are still open longevity and divided for average time And then for a very small factor exactly how many different types of credit you have from student loans mortgages in credit cards

So what is this chart actually telling you it is telling you to pay your bills on time and don't max out your cards Now that we've covered very briefly how credit scores are calculated we're gonna cover exactly what credit cards can do for you and how they can hurt you So up next on this journey is different types of cards that you can actually take out there is a basic vanilla card that is exactly what you'd expect from a credit card with no perks bonuses or usually heavy fees There are regular rewards cards which are pretty much the industry standard to make sure that they can attract more customers annually And there are student credit cards but they are directed more at students with lower actual balances and lower APRs

Now we're getting onto some more very different types of cards we have secured cards which you actually give the bank or institution money that is used for collateral for the entire debt for the card In case you default on it These are like credit cards on training wheels and are usually for building credit and similar to the secured card there are charge cards which pretty much work like a glorified gift card and you put money on it and you spend it just like you would a gift card After charge cards there are limited cards which are designed to limit where they can be used how they can use and in what institutions they can be used And on to the bad or credit repair cards we have our subprime credit cards which are designed to be manipulative and target those that have poor credit scores

And last but not least there are debt consolidation cards which you can transfer your debt from another card into this one They usually have zero APR but if you miss a payment you will be hit with a hefty fee So the most obvious bonus to having a credit card is easy access to a short-term loan this being its primary focus and purpose This is also its major drawback as many people will not be able to refrain and about 39% of the population carries a balance First and foremost so let's go over the basic rewards card this is the most marketed product and usually gives you rewards between 1 and 5 percent depending on how the card is set up

Amazon gives you 5% back for everything inside their store purchases and 1% for everything else whereas other cards giving you 3% back for gas and 1% for groceries Really depends on the exact card that you have shop around for the one that you'd like Other bonuses and perks can include regular points for random prizes or frequent flyer miles And then there are these secured credit cards these are pretty much the training wheels of credit cards that allow you to help and increase your credit score until you can get a full-grown credit card the drawback to this is that you have to give them capital usually $300 to $500 before they will actually allow you to open up the card

Positive side is you can grow your credit score with these And then there are cards out there they're designed to actually consolidate debt usually with zero a p RS for a certain specific amount of time or for the longevity with the drawback being that they will charge you high fees if you miss a payment This helps people that have spiraled out of control and would like to get a handle on their credit card debt There are also cards like American Express Platinum Card which has a $500 annual fee and really doesn't exactly work like your regular credit card With no APR just a heavy fine if you do not pay off the entire balance by the end of the month perks are flyer bonuses and the ability to enter most airport first class lounges in the world

There are a lot of other bonuses that come with this card and you can check out their site This is another option for those that are willing to pay the 500 annual fee to get a few extra perks And fun fact about this card if you are a service member of any sort you can get this fee waived every single year So to roll into the next point let's talk about exactly how much you can expect back from these reward points remember the 1 to 5% that you get back for purchases You can usually expect through average spending on a card between 70 and 200 dollars depending on exactly how your card works and your spending habits

And here lies the HOOK Companies are incredibly good at running numbers and they know that they are able to lure more customers in while giving them these perks and rewards They are banking on the 38 percent of the population that has around $4,000 in credit card debt that is rolled over every single month and they pay a high APR fee for it I will let you do the math 1 to 5 percent – 18 percent It is actually more than what they say but we will get int that a little bit later! Those rewards are there to bate new customers in as acquiring customers is one of the most costly parts of the business

They're banking on 38% of the population rolling over this credit and paying the high APR fee as most would conclude just pay off your credit cards every month and you'll be good pay them down all the way to zero and that's the key pay them all the way to zero every month Zero ZERO ZERO! and we will go over why in a minute Best practices while swiping that card is you have the money already set aside in an account to pay off that credit card at a relatively soon future date And as always before you open a credit card you should always read through the contract and understand exactly what it means and make sure that they are not talking about a separate card that is also covered within this contract Biggest thing to look for is the APR rate Promotions, when they start and finish and when you can be fined how much this is what transaction fees and other fees apply to this card making sure that you are not looking at the wrong card like right there and having a good clear idea of how these credits are spent and this brings us to our last point of why 18 % is not 18% This little bad boy right there the calculated daily average is what you're going to be charged and we're going to cover exactly how that works The way that the average daily balance calculation is done is you take 18 percent divided by 365 divide that down and then they do the math every single day and compound that as it goes throughout the month and this would be exactly how much they find you and here comes the real catch behind it say you had a card at 18% and $1,000 on it you spend it at the beginning of the month have 25 days that you've spent and then you pay it all of it off except for $15

at the end of that billing cycle all of that accumulated interest would still charged you as if you had had $1000 on at that last day even if you only had $15 still in the account because of that daily average that you had throughout the month charge would be in the area of 20 to 30 dollars more than what you would have in the account on your balance and this is why you should always pay your card down to zero absolute zero every single month so you don't end up paying this fee and this is how the credit card companies get away with having an 18 and more percent credit card companies have gotten very good at catching your money make sure that you understand how this works and how the contract works so they don't get you now on to tips tricks and best practices for credit card use whenever you try to take out a new credit card the company will go and pull your credit score this is known as a hard inquiry and will negatively affect your credit score by up to five points purchasing items like cigarettes and alcohol on your credit card can negatively affect your credit score by up to 10 points because these are classified as high risk activities and people that aren't dead pay the companies back their money a lot better than dead people most companies will not actually reduce your available credit after you have risen it be careful because I became a victim after I said yes just crank it all the way up and they gave me $18,000 credit limit for obvious liability reasons that I just didn't want to have risk I closed the card this is one of the best ways to improve your credit score and it is pretty darn simple I opened up a three to four credit cards and kept the usage between zero and 20% don't worry cuz when you first do this you're gonna have a negative effect on your credit score and it's gonna drop by potentially 40 50 points when you first do this just stick to the process keep paying your bills on time and your credit score will go up in addition you can ask your utility and phone bill companies to actually report your spending with them as a continuous event system this will improve your credit score and if you can get them to do it it will help caution caution caution be very careful on the campuses with the companies that are handing out student cards a lot of young adults feel like they're being brought into adulthood when they have this card and people get very attached just be aware of the scheme and they're trying to cook you credit cards actually increase the money supply believe it or not when they make this loan they're creating money and when you pay it back you're destroying money interesting topic I have a video covering exactly the process and how it creates all of the money through debt cash advances cost more as they are considered a higher risk because they don't know what you're spending your money on and can have a little bit more tapped on to how much they charge you for pulling it out potentially and the APR can be increased for these and stick around to the end because I'm gonna give you some bonus information about the new chip cards so as we round up to this video the biggest things you need to do to increase your credit score are pay your bills on time and make sure that you don't max out your cards credit cards come in many shapes and form and can help you have reward points to consolidating debt make sure that you understand the terms and conditions and exactly how you can make them work for you and as a last word of warning and caution credit cards are the number one marketed product in the world's history and there is a good reason for it companies make Bank off of people rolling over credit cards imagine what you can do if you've made fifteen to thirty five percent interest back on your money so like I promised the cold hard dark dirty truth about the new chip cards they're not as safe and secure as you think they are the chips are very secure on them the backside with that strip still is your information on it that is completely unencrypted be vigilant and make sure that your information doesn't get stolen so if you enjoyed this video don't forget to smash that subscribe button so that YouTube you enjoy this content and question of the day how exactly these carts get started throw down the comment section this has been Mariko a break