A credit card allows you to purchase items now and pay for them later. Credit cards are an example of revolving credit.
When you get a credit card, it will have a limit, also known as a “line of credit.” Your first credit card may have a limit of $350 to $500. Here are some important things to remember about using a credit card:
A few words of caution concerning your credit card:
You are responsible for purchases made with your credit card. Read your statement very carefully, especially if you need assistance in using your credit card. If you learn that someone has used your card without your permission, call the phone number on the back of the card to report this activity.
Many credit cards advertise low interest rates, but they may not make it clear whether the rates will go up after the introductory period. To find the best credit card for you, take a look at some of the credit card comparisons on websites like nerdwallet.com, bankrate.com, and creditkarma.com.
If you do not pay the minimum payment on time each month you will hurt your credit history. If you pay the amount due in full before the due date there will be no additional charges (no interest due) and you will improve your personal credit history.
Below is a sample monthly credit card statement. Beneath the sample is a description of each section. Here is another example of a credit card statement.
ABC Bank Credit Card Account Statement
Account Number XXXX XXXX XXXX XXXX
February 21, 20XX to March 22, 20XX
|Past Due Amount||+$0.00|
|Statement closing date||3/22/XX|
|Days in billing cycle||30|
Call Customer Service: 1-800-XXX-XXXX
Lost or Stolen Credit Card: 1-800-XXX-XXXX
|Minimum Payment Due||$53.00|
|Payment Due Date||4/20/XX|
If we do not receive your minimum payment by the date listed above, you may have to pay a $35 later fee and your APRs may be increased up to the Penalty APR of 28.99%.
If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example:
|If you make no additional charges using this card and each month you pay…||You will pay off the balance shown on this statement in about…||And you will end up paying an estimated total of…|
|Only the minimum payment||8 years||$2,785|
If you would like information about credit counseling services, call 1-800-XXX-XXXX.
A summary of the transactions on your account—your payments, credits, purchases, balance transfers, cash advances, fees, interest charges, and amounts past due. It will also show your new balance, available credit (your credit limit minus the amount you owe), and the last day of the billing period (payments or charges after this day will show up on your next bill).
Your total new balance, the minimum payment amount (the least amount you should pay), and the date your payment is due. A payment generally is considered on time if received by 5 p.m. on the day it is due. If mailed payments are not accepted on a due date (for example, if the due date is on a weekend or holiday), the payment is considered on time if it arrives by 5 p.m. on the next business day. Example: If your bill is due on July 4th and the credit card company does not receive mail that day, your payment will be on time if it arrives by mail by 5 p.m. on July 5th.
This section states any additional fees and the higher interest rate that may be charged if your payment is late.
An estimate of how long it can take to pay off your credit card balance if you make only the minimum payment each month, and an estimate of how much you likely will pay, including interest, in order to pay off your bill in three years (assuming you have no additional charges).
Remember, your goal should be to pay your credit card balance in-full each month. If you are carrying a balance on your card from one month to the next, you are probably spending too much money.