CREDIT CARD 101

As long as you don’t have a credit experience (credit card, line of credit, loan, etc.), you don’t exist in the eyes of credit companies. Even if you have a lot of money and/or a well paying job, it doesn’t change anything. They don’t know you nor trust you.

The easiest credit to get is a credit card. And you can apply as soon as you reach the age of majority in your province (BC, 19 years of age).

Here’s how credit cards work. Every month, you borrow money when paying with your credit card. No matter what you pay with it, it’s not your money that you’re using. Credit card companies are quite nice; they lend you money for a whole month, without asking for anything.

Except if you don’t pay them back in time or if you don’t pay the whole amount you borrowed. Then they’ll charge you with interest charges (usually 18% annually, so 1.5% monthly).

Every month, you receive a statement (online or by mail). You have 2 options to pay and have/keep a good credit score. 1. You pay the whole amount you borrowed before the deadline. 2. You pay the minimum amount (you’ll get 1.5% interest charges over the remaining) before the deadline. Option 1 is what you should do 99.9% of the time. Option 2 should be used only if option 1 isn’t possible. Option 2 won’t affect negatively your credit score; but it will be harder for you to pay back all the money you borrowed if you’re adding interest charges every month…

Something I learned recently: don’t use your credit card to its limit. If you do, it shows that you NEED credit in order to pay for your lifestyle.

Now, credit is dangerous if you’re not responsible and intelligent with it. My advice would be to use it ONLY when you know you already have the money and don’t even HAVE to use credit. Meaning: you choose to use your credit card to create your credit history and not because you don’t have the means… Makes sense?

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