Navigating the World of Credit and Credit Cards: What You Need to Know

Discover essential information about credit cards, from features and fees to how to build a good credit history and manage your financial journey.

Credit cards not only make it easier to make purchases but also help you build your credit history and earn rewards. However, they come with responsibilities and potential pitfalls. This article will clarify how credit cards work, what to consider when choosing one, and why responsible usage is important.

The Basics of Credit Cards

How Do Credit Cards Work?

Credit cards allow you to borrow money from a card issuer to make purchases. Each card has a credit limit based on factors like your credit score, credit history, and income. You must repay this borrowed amount to avoid interest charges and debt.

Key Terms to Know

• Credit Card Balance: The total amount you owe at any given time.
• Credit Utilization Ratio: Your total credit card debt divided by your total available credit. A high ratio can negatively impact your credit score.
• Interest Rates: The cost of borrowing money if you don’t pay off the balance each month.
• Credit Card Statement: A summary of your transactions, payments, and remaining balance for each billing cycle.

What is a Credit Card Statement?

A credit card statement shows details about your account, including the statement closing date, payment due date, total balance, minimum payment, and transactions. Regularly reviewing your statement helps you track spending and avoid late fees.

Choosing the Right Credit Card

Factors to Consider

• Interest Rate: A lower interest rate is beneficial if you plan to carry a balance.
• Rewards and Benefits: Look for cards that offer perks like cashback or travel points.
• Annual Fees: Be aware of fees associated with the card. JetStream credit cards have no annual fee and competitive rates.

Types of Credit Cards

JetStream Federal Credit Union offers three types of credit cards:

• Preferred Visa Rewards: 14.65% APR, no annual fee, and rewards points for purchases.
• Visa Classic: 13.65% APR, no annual fee, and lower interest rates.
• Secured Visa Classic: 17.65% APR, no annual fee, designed to help build or restore credit.

Benefits of Responsible Credit Card Usage

Building Credit with a Credit Card

Making timely payments demonstrates responsibility and improves your credit history. Keeping a low credit utilization ratio also helps your credit score.

What is Responsible Credit Card Usage?

• Making payments on time.
• Spending within your means.
• Monitoring your account regularly.

How Responsible Usage Affects Your Credit Score

Timely payments positively impact your payment history, a key factor in calculating your credit score. Responsible usage can lead to better credit opportunities over time.

Understanding Credit Card Debt and Interest Rates

What Happens if You Exceed Your Credit Limit?

Exceeding your credit limit can result in fees, a higher credit utilization ratio, and a lower credit score.

Effectively Managing Credit Card Debt

1. Create a budget.
2. Pay more than the minimum each month.
3. Focus on high-interest cards first.
4. Consider balance transfers or personal loans to lower interest costs.

The Role of Credit Unions in Credit Card Options

Credit unions like JetStream offer competitive credit card options, lower interest rates, and fewer fees compared to traditional banks. Their member-owned structure ensures personalized service and financial education for informed decisions.