A Credit Card Primer For the Young and Old

We recently came across what we thought was some pretty interesting information from the site www.themint.org which is a website dedicated to teaching kids all about finance. We thought it was an excellent primer so we would like to summarize and share some of that information here.

Credit Limits

Credit limits are set by the credit card issuer and they dictate how much the credit card holder will be able to charge to their card. That amount is based upon the credit card company’s assessment of how much debt the cardholder can handle without running into financial trouble.

Minimum Payments

Minimum payments represent the smallest amount that the credit card issuer will accept every month when you carry a balance from one billing cycle to the next. When you do not pay your bill in full each and every month it is known as revolving credit.

Grace Periods

A grace period basically represents a free loan from the credit card company. As long as you repay the amount that you have charged to your credit card in full prior to the expiration of the grace period you will not be charged any interest. It is important to keep in mind that using a credit card is pretty much the same thing as taking out a loan.

Late Fees

The average billing cycle of a credit card is 25 to 30 days. If you are late paying your bill a fee is assessed which is usually around $35. More important than that, if you are late paying your credit card bill your interest rates will be raised significantly. Always pay your bill on time. If you don’t it will end up costing you a lot of money.

Interest Rates

Interest rates are charged when you do not pay your balance in full at the end of the billing cycle. Interest rates can range anywhere from the single digits all the way up to 18% and higher.

Lost or Stolen Cards

If you should ever have a credit card that is lost or stolen you should report it to your credit card company immediately. Your liability on unauthorized charges on a credit card that has been reported missing is limited to $50, but only if you report it lost or stolen in a timely manner.

We realize that some of these concepts are pretty basic, but still and all we felt that they were important enough to review and we hope that some of our younger readers found this information to be helpful.

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