April Is Financial Literacy Month

If you’ve never had a credit card or you’re wondering if one is right for you, there are several things to consider before you apply.

Pros and Cons

How do you plan on using a credit card? Credit cards can be useful when it comes to paying for things quickly and easily, especially if it’s an emergency. You can use your credit card statement to keep track of how much you spend and on what. Finally, if your credit card or number is stolen, you usually do not need to pay for things purchased with the stolen information.

However, credit cards have their drawbacks. Buying things on credit means that you are promising to pay for these things at a later date, that is, when your credit card bill is due. If you don’t pay off the whole bill, you will be charged interest and other fees.

Because buying things on credit doesn’t require you to have the money now, you may rack up more charges on your credit card than you have money to actually pay for. This can lead to debt and other big financial problems.¹

Your credit history, which includes credit card debt and your payment history, can affect your credit score.² Your credit score can impact things like car insurance rates and whether you can open a bank account.³

Check out Clean Up Your Credit this Spring! to learn how to access your credit report and improve your credit score.

Know the Terms

Make sure you understand the interest, fees (including flat fees, late fees, and over-the-limit fees), credit limit, and payment deadlines and grace periods for the card.¹

Will You Qualify?

Whether you will qualify for a credit card depends on your credit history and other factors such as debt and how much time you’ve spent at your current job or residence. If you’ve never used credit, you may want to look into a card for first-time users.¹

1. Joan P. Elmore, Michael S. Gutter, and Travis P. Mountain, YOU and YOUR CREDIT: Credit Card Basics, FCS7230, Gainesville: University of Florida Institute of Food and Agricultural Sciences, 2012, http://edis.ifas.ufl.edu/fy1065
2. “Credit Reports and Credit Scores,” Board of Governors of the Federal Reserve System, 2011, http://www.federalreserve.gov/creditreports/
3. Mary Harrison, Credit Reports and Scores, FAR5017, Gainesville: University of Florida Institute of Food and Agricultural Sciences, 2015, http://edis.ifas.ufl.edu/fm131

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