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Everything You Need to Know About Credit Cards in 2 Minutes

everything you need to know about credit cardsAmong all the financial products available, you must admit that credit cards are the most divisive. Everybody has their own opinion. It is one of those topics that strike up heated arguments between those who care for, and those who are against. They usually are quite vocal with their beliefs, which they wish to pass on to others. You could say that credit cards are here to stay. So, it is certainly time to find out everything you need to know about credit cards. 

See, the world is more technologically advanced, it may be practically impossible to go back to a world where people transact in cash. Think about it. When was the last time you saw anybody using cash as their primary method of making payments? Everywhere you look, everyone has a credit card. I can actually foresee a future where credit cards will be the only means of transacting.

Related: Find Your Ideal Credit Card

Dave Ramsey is one of the most well-known anti-credit card voices. He believes that it is possible to live without a credit card since a responsible way of using a credit card doesn’t exist. He insists that even using it as a debit card will not help you at all.

In this review, you will also find out how you are being charged to use your card as well as how those credit card companies are making their money.

Take a look at everything you need to know about credit cards…in as little as 2 minutes. 

Everything You Need to Know About Credit Cards in 2 Minutes 

So, opinions are quite varied, and you will be surprised to note that Ramsey has got quite a following. Well, mostly because people tend to fear what they do not know. Since he has his own radio show, he can pass on his beliefs of credit cards to his listeners.

However, if you are on the fence and probably have no idea which is the right side to stick to, or you are just wondering what the big deal with credit cards is, hopefully, this post can assist you. Come check out everything you need to know about credit cards to get a clear understanding before making a decision. 

How do you define a credit card?

This is the best place to start. Defining what a credit card is and what it can do. You may be unaware of what you can do with your card. This is why it is so important to learn everything you need to know about credit cards. 

A credit card can be viewed simply as:

  • a plastic card
  • issued by a bank or building society, or any other credit card company
  • sort of freedom — it allows you to make all sorts of purchases without carrying cash.

When you purchase a product using a credit card, the credit card issuing company will pay for the products on your behalf. You will then receive a bill at the end of a specific period – mostly a month. Within that month, you shall be required to pay back the money. However, the repayment process can be very stressful because this is an area that most people do not understand. Read further to learn more about this process. 

What is the difference between a credit card and a debit card?

A Credit Card

A credit card is a card you use to make purchases with money that you don’t have. This means that the card allows you to borrow money against a line of credit. This line of credit is known as the “card’s credit limit.”

You can make as many purchases as you wish on your card, as long as you do not exceed the credit limit. These transactions shall be reflected on your bill, which you shall be required to pay at the end of the month.

It is important to note that you shall be charged interest on the money you spend on the card per month, but if you do not purchase anything with the card, there shall be no charges.

Credit cards:

  • do tend to have high-interest rates
  • the credit card balance and your repayment history will affect your credit score
  • credit score can be positively or negatively affected

A credit score is a 3-digit number that is given by credit bureaus, to summarize your credit history.  What does this mean for you and your credit card? Simply put, if you do not pay the card on time and end up with too much credit card debt, your score shall be negatively affected.

A Debit Card

A debit card, on the other hand, is your ATM card. This is a card that:

  • allows you to pay for purchases
  • works almost similar to a credit card
  • doesn’t accrue any interest on money spent
  • BIGGEST DIFFERENCE – debit card draws money directly from your account whenever you use it.

Using a debit card is the same as withdrawing money from an ATM.

What happens is whenever you purchase something with the debit card, the bank places a hold on the amount of purchase. The merchant then sends the transaction to the bank, who will transfer funds from your account to their account. 

The beauty of a debit card is that you do not owe anyone anything at the end of the month.

which debt to pay off firstMaking Credit Card Payments

Credit card payments are important when learning everything you need to know about credit cards. Most people will tell you that the reason why they are in deep debt is due to their credit cards. This is because it is money that you do not have, and yet, you have been given access to it. It is very easy for you to spend beyond your means.

In addition, you can get many different credit cards with different limits that you cannot possibly afford to pay back.

Here is how credit cards SHOULD be paid back;

  • once a month, credit card companies will accumulate the number of purchases you have made on the credit card
  • they will send you a bill
  • you should settle this bill in full on the due date

However, according to research, over 45% of Americans never settle their credit card bills on time or in full.

What To Do If You Are a Part Of The Percentage

If you cannot settle in full, the bank will give you the option of paying a minimum amount per month. This helps to avoid further fees. Each month, you shall be allowed to keep using the card, as you pay a little at a time.

It is highly likely that you’ll experience fees with your credit card. In addition, if you do not pay the bill on time, or do not pay the minimum amount, then additional interest will be charged on the already existing credit card bill. It is important to note that the interest charged on non-payment accumulates typically very quickly. You may find that a bill of $100 rapidly increases to $200 within one month.

When you pay the bill in full and on time,

  • The bank will consider you to be a well-behaved customer
  • Good payment history can be reported to the credit bureaus which will then be used to improve your credit report and score

However, you need to know that banks don’t really want you to be a well-behaved customer, because they get most of their money from penalties and additional interest on unpaid credit cards.

Related: 8 Things You Can Do Once Your Credit Cards Are Paid Off

Why do most people hate credit cards?

Credit cards make you spend money even when you do not want to. Scientific studies have shown that people are most likely to complete a purchase when they know they’ll be paying with a credit card, than if they were to spend cash.

Spending is much easier with a credit card because:

  • Cash is scarce so people try to conserve it
  • The psychological barrier exists with cash

The barrier doesn’t exist with credit cards because credit cards contain money that you cannot see, hence the ease of spending. 

On the other hand, with cash, you can never spend more than you have. But with credit cards, it is extremely easy to live beyond your means.

The bank will also never check how much savings you have in your account before they approve the purchase. All they need to see is that you haven’t exceeded your limit. In fact, even if you have exceeded your credit limit, the bank will most likely approve the purchase, just so they can charge you extra in terms of interest.

Therefore, as a result of all this, many people find themselves spending more with their credit cards than they would typically spend. This just ends up making the banks more profitable, while destroying their client’s financial future.

Hence, most people tend to dislike credit cards, while continuing to use them.

An anonymous writer once said that; Credit cards are like hammers. You need them to drive nails through the wood, but if you are not paying close attention, you can easily hurt yourself in the process.

Related: Should You Use Cash Or Credit Cards?

Everything You Need to Know About the Benefits of Credit cards:

Even with their limitations, it is virtually impossible to live without credit cards. Here are some of the benefits of using a credit card;

1) The concept of using other people’s money

This is only for a short period of time if you are wise. So, in case your paycheck is late, and you need to buy food for the family, a credit card can come in handy.

Credit cards can also help you organize your finances; if you have other loans that need to be cleared, you can use the credit card to settle your most urgent expenses, while using your paycheck to pay for what needs to be cleared.

2) They create a barrier between your money and merchants

A credit card can be quite beneficial when dealing with fraud. They can create a line of defense between a fraudster and your hard-earned money.

It is important to have a good look at the rules before applying for a credit card. However, in most cases, you shall find that you are not liable for any unauthorized use of your credit card. This is unlike a debit card, where unauthorized use will affect your bank account. If you happen to pay for a purchase in a store which later on ends up having a problem, and the store doesn’t accept to refund you the money, you can simply call the credit card company and ask them to stop the payment.

In this regard, stores have a much bigger incentive to ensure that they resolve any issues between them and their customers because too many reversals can affect their businesses.

3) Extended protection and warranties

If you have problems with a purchase, and you used a credit card to pay for it, the bank gives you very many options compared to paying with cash.

Most credit cards usually

  • have an extended manufacturer’s warranty
  • they also offer purchase protection

In case you damage the product after purchase, you shall have coverage by the warranty. The bank can even replace such a purchase.

In addition, credit cards offer purchase price protection, which means that; incase a store lowers the purchase price of a product after you have already purchased it, the bank can refund you the price difference.

4) Credit card rewards

This is one of the most significant benefits of using a credit card. Credit card rewards are the same as free money. It is their best incentive yet.

In order for banks to gain more users and more credit card transactions, they offer customers rewards such as:

  • sign-up bonuses
  • cashback money
  • zero percent introductory interest

The savviest credit card users will take these rewards to an extreme level. They will ensure they use their cards for all sorts of transactions, to accumulate as many miles or points as possible so that they can earn some good rewards.

Related: The Best Rewards Credit Cards

Everything You Need to Know About Credit Cards: Conclusion

Credit cards are not only useful but extremely powerful and they can either make you or break you. Many people have had their finances messed up, simply by misusing their credit cards. You must understand the power you carry in a credit card. You can also choose to use your debit card or a pre-paid card instead of your credit card. The debit card doesn’t accumulate any charges and neither does it charge you interest to use it. The best advice would be only to use it when you do not have any other option and to ensure that you pay it in full at the end of the month.

Have you considered everything you need to know about credit cards in order to make your decision?

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AUTHOR LaTia Longuemire

My name is LaTia Longuemire. I enjoy writing, singing, and cooking in my spare time. My passion is helping others. At this stage in my lifetime, I'm primarily focused on my children. They are everything that keeps my world spinning.


  1. I just treat my credit cards as if they’re a debit card. Everything is paid off in full each and every month. Doing it any other way is crazy.

    • Yup, same here. I can see where occasionally I might spend more because I’m using a card, but I’m definitely still responsible with it.

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