Abbey Credit Union | Establishing Credit

Credit Cards	Establishing Credit :: Credit Cards

The transition from being a teenager to an adult is a process full of new experiences and learning.

A lot of individuals are experimenting with freedom for the first time and the expenses that come with living on their own. This includes food, utilities, household necessities, clothing, and entertainment. Being in school full time makes it hard to work full time as well, and the idea of credit can get pretty enticing. Credit is a good thing, but it’s important to be informed, or you could end up in a heap of debt. In a recent study conducted by the U.S. Public Interest Research Group (PIRG), “the average American (college) senior now racks up more than $2,500 in credit-card debt by the time they receive their diploma.”¹

What is Credit?

	Credit is “a term used to describe an arrangement in which goods, services, or money is received in exchange for a promise to repay at a future date.”²
	The most common form of credit is a credit card, as it is the most easily obtained. People can receive a credit card from banks, gas stations, or their favorite stores.

How a credit card works:

When you are given a card, the issue determines your limit based upon your credit history. Each month, you are sent a bill of your purchases charged plus any annual fees, finance charges, and interest rates.

You can do one of two things with the balance on your credit card:

1.	Pay it in full
2.	Pay at least the minimum amount due and pay off the balance in the following months (doing this, however, will accrue interest from the APR- or annual percentage rate).

The minimum amount that you are required to pay each month is a combination of the interest plus a small amount of the principal (the amount owed before interest is added).

Finding the right credit card:
A lot of credit card companies will send you pre-approved cards. Be cautious of opening these accounts before doing some research. When you have decided it’s time to begin using a major credit card, shop around. Come into Abbey Credit Union and we’ll help you compare interest rates, finance charges, and other fees. Also, be sure you know about all the terms of conditions before jumping into anything.

The 4 Best Ways to Stay on Top:

	Your credit limit is NOT your income. Only use your card when absolutely necessary.
	Pay as much of the balance as you can monthly to keep interest rates and other fees down.
	Read your statements carefully to catch any costly errors.
	Pay your bills on time. Late fees are an avoidable waste of money.

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¹	Soller, Kurt. “Majoring In Debt: Despite the Crunch, Credit-Card Companies Keep Targeting Undergrads.” Newsweek. Newsweek, 17 Feb. 2009. Web. 1 Aug. 2009. <http://www.newsweek.com/id/185210 >.
²	Garman, Thomas E. and Raymond E. Forgue. “Credit Cards and Consumer Loans.”Personal Finance. 9th ed. Boston: Houghton Mifflin, 2008. 182-202. Print.

The information contained in all articles, links, sponsored articles, and FAQs within this website does not necessarily represent the views of Abbey Credit Union and its affiliates. This website is designed to offer helpful hints to consumers. Please consult an attorney, CPA, or other professional for expert advice.