Money·3 min read

theSkimm on Credit Cards

woman with credit card and tablet
Design: theSkimm | Photo: iStock
July 1, 2020

The Story

If you see it, you like it, you want it...a credit card can help you get it right now. But you still have to pay for it. And hitting snooze on your payments means you could pay WAY more than the sticker price.

Back up, and start from the beginning.

Credit cards come in a lot of different flavors. There are ones that give you rewards, ones that require a deposit to open, ones that come with a steady interest rate, and ones with rates that can go up and down. Most are connected to a line of credit, like a loan. But instead of getting all the cash at once, credit card issuers lend you money as you spend it. Every time you buy something, they add it to your tab.

What’s in it for them?

Your money. Card issuers charge fees for everything from sending your payment late to using your card in another country. Some make you pay a yearly fee just to carry the card in your wallet. And they make a LOT of money by charging interest on anything you don’t pay back by the end of your billing cycle. Credit cards usually come with higher interest rates than other types of loans. Making credit card debt a deep hole to crawl out of. Which is one reason you might’ve heard credit card debt is 'bad debt.'

Tell me more about interest.

It adds up. Fast. Thanks to a fun thing called compound interest. That’s when interest charges are added to your balance...that already includes interest charges from old statements. Making the amount you end up paying back significantly more than it originally was. Psst...getting a lower interest rate can make life with debt less painful.

And for those reasons...I’m out.

Not so fast. Using credit responsibly is an important part of adulting. It can boost your credit score. That’s the three-digit number lenders use to decide how much to charge you for new loans. Kinda important when you want to buy a home or new car. Oh, and some employers and landlords also check your credit to get an idea of how much they can trust you.

Any other good reasons to use credit cards?

They usually come with benefits your debit card may not. If your card gets stolen, most card companies will let you off the hook for fraudulent charges while they investigate sketchy activity. Some cards also come with extras like purchase protection and extended warranties. And then there’s rewards: cash-back, points, airline miles. Yes, please.


Making smart credit card choices can help you reach big dreams, like buying a home. Not-so-smart choices can turn your finances into a nightmare...that you don't wake up from for a long time. Sleep better by learning how they work and making a plan to pay off your balance ASAP. 

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