What You Need to Know About Credit for Teenagers
What is Credit?
There are different types of credit. Such as personal loans which must be paid with interest (for things like college tuition), installment loans which are made in fixed monthly payments (for mortgages), and credit cards which allow you to purchase as much as you want up to your maximum credit limit and you must repay everything you borrowed.
The benefits to credit are that you can buy things when you don't have all of the money for it yet and if your credit score is high, purchasing things of high cost using credit is much easier (companies will trust you to pay what you owe). Some disadvantages are that you are charged interest (money paid for being able to borrow money) by a lender, and if you mess up and your credit score becomes low, making purchases becomes more difficult (especially with homes).
There are different fees you may run into if you are a credit card holder. They normally charge an annual fee for using the card. A penalty fee can be charged if you are late with your payment. An over the limit fee will be charged if you spend over your credit limit.
You can use credit cards almost everywhere. Unless a store says "cash only." A credit card is likely to be taken.
Benefits to credit cards include not having to carry cash, building your credit score, creating records of your purchases, and consolidating bills into one payment. Some disadvantages to a credit card are the fees, losing track of how much you spend (which can cause major financial difficulties), and an increase in impulse buying.
Shopping for Credit
Discover it for Students: This card has no annual fee. The card starts you off with no APR for a year, then you begin to pay 11.24%-23.24%. You will receive $20 cash back each year your GPA is a 3.0 or higher. You will receive 5% cash back on certain categories that change quarterly and 1% on everything else. Your APR will not be raised for late fees and there are no overlimit fees. You'll have an on and off switch to freeze your card and you will not be liable for fraud.
Citi ThankYou Card for Students: This card also has no annual fee and no APR, but only for 7 months. It will then be 14.24%-24.24%. Earn 2,500 ThankYou points after spending $500 in the first 3 months. 2 points per dollar spent on dining at restaurants or entertainment and one point for everything else. Citi will look for lower prices on items you purchased so that you can request a refund and get the lower price. Citi allows you early access and vip tickets to certain events. There is no overlimit fee and you are not liable for fraud.