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Have you ever gone shopping and wanted to buy more things than you actually had money to pay for? Ever wished you could just whip out a Visa or MasterCard and say “charge it!”?
It sounds tempting, but credit cards can be a costly way to make
purchases. You have to pay to use a credit card, and you pay in
the form of interest. Interest
is a fee or amount that you pay when you borrow money from a bank,
credit card company, or other financial institution. When you use
a credit card, you are borrowing money from the credit card company
to make a purchase. Usually, credit card companies charge you compound
interest. That’s when interest is charged on the
original loan amount (called the principal),
plus on the interest that has already accumulated over the
time that you pay back the loan. It’s a double whammy!
Check out our cool Charge! game and see how much things really cost when you buy them with a credit card.
Did you know…?
- Using credit cards costs money.
- Some employers will not hire you if you have made a late credit payment within two years of applying for a job.
- Some credit card companies make it too easy for teenagers and college students to obtain credit cards. The average college student has $2,200 in credit card debt*, and one in five college students owes more than $10,000 on credit cards.**
- If you use a credit card, you should only charge what you can afford to pay back.
- If you pay just the minimum due on a credit card bill, you are not reducing the amount owed, since interest charges are accruing.
*According to Nellie Mae Corp., the nation’s largest maker of student loans.
** According to a Georgetown University study.
Read what happens when young people get credit cards before they are ready to handle the responsibility:
Article: Credit Card Companies Aim Marketing at Young Customers
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