Basic Guide to Understanding Credit Cards

Your first credit card can make or break your credit score. It can also set you up for a path of really good or destructive spending habits. Lets eliminate any worries, stress, and anxiety regarding credit cards and learn the basics together.

Contrary to what many people say getting your first credit card is not always the easiest task when you're 16.

Your score will not magically boost to 800 the way memes on social media joke.

And your credit score can matter a lot down the line.

Keep reading to find out what you should know before you get your first (or next credit card), and a few healthy spending habits to boost your credit easy and fast.

Table of Contents

Define Credit Card:

Types of credit cards

Tips for managing

Building credit tips

Vocabulary words you should know

What is a credit card?

A credit card is a form of borrowed money. You use it in a store by swiping or putting the information in online the same way that you do with a debit card. The major difference is that one (debit) has money that you have earned in some way or were given, and a credit card can have a limit bigger than the actual amount you can afford to spend.

Should I have a credit card?

It depends. Use the road map below to get a better idea. A steady reliable income, financial literacy and a mindset shift can give you the power to credit card spending.

If you ask Dave Ramsey you would be convinced that you don't need one to boost your credit and from what I've learned of his reasoning I can understand.

Consider why you want one

There are apartments that will accept your application based on annual income and not your credit score. Also when you budget and bargain hunt for a car or any other expensive item or gift you may end up paying for it in cash, without your credit score being checked.

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Another common question is always what kind of credit card you should get

Student Credit Card -

Given to students who are in a college or university, it is assumed that the individuals applying don't have much a credit score.

Usually beginners to the world of credit and since the credit companies are taking a risk with allowing students to open an account, there are some pros and cons to opening a student card.

Benefits -

It's reported on your credit score and has the ability to work in favor of boosting your credit.

It allows you to be accepted for a card even if your score is low at the moment.

In the long term when it comes time to aim toward bigger goals like buying an apartment, saving for vacations, or beginning a new path in life, you'll have a credit score to fall back on.

Cons of a student credit card

They often have smaller credit limits.

This can lead to frustration because it's not enough to buy things that college students usually need like books, supplies, technology, or even tuition.

The interest charged is also a lot higher than it would be on a secured or unsecured credit card because the companies want to ensure they are reimbursed for allowing you to open a card.

Fees for international spending or cash back can also be higher.

And similar to a secured and unsecured cards, not making at least the minimum payments can be reported and drop your score.

Secured Credit Card -

With this type of card you place a deposit and that amount is used to approve you for the card.

The deposit can also be your credit limit.

An example of a credit card would be the CITI Secured card where the minimum amount that can be deposited is $200.

After a certain amount of time (Sometimes 18 months) the credit card company may offer you back your deposit as well, which makes the downpayment only a temporary investment.

Benefits of a secured credit card.

It limits the amount of debt you can get into.

If you use the card as something that can boost your credit, but not give you access to extra funds, having a card with a $200 limit is useful.

1. It goes on your credit report

2. It counts as a revolving form of credit.

As you grow in the world of credit you will be able to apply for other opportunities and be approved because your credit is considered good (670+ ) instead of fair (< less than 670).

Cons of a secured card

You have to use your own money to get the card.

For people who are living paycheck to paycheck or simply can't find the wiggle room to dish out hundreds for a credit card you can save for it. A sinking fund doesn't have to only be used for bills or things you want to buy, this type of savings can be used to boost your credit score.

Unsecured Credit Card-

With this type of card you are given a limit determined by the credit bureaus, This amount is dependent on the score you have at the time.

The bigger and better your credit score, the higher the limit you are given, and the more perks you could receive.


You may have access to a high credit limit automatically.

With this type of card you could have easier access to cash back, a period of usage where interest isn't added to your account, and additional sign up bonuses.

Continuously paying your bills on time and keeping your utilization below 30% will increase your chances of having your limit raised, as well as your score.


If you have a low income, haven't developed the necessary tools for curving your spending habits, and are in a position where you need your credit cards to afford items and experiences— you will easily get sucked into debt.

There is a freedom that comes with having an unsecured credit card. If your limit is $1500 and you bring home $500 every pay check, there is a new dangerous mindset that can develop.

The idea that it's only another bill or that you only live once when it comes to wracking up debt, is not a productive way to spend money. It's fun now but hurtful in the long term as interest accumulates.

Three Tips for managing credit cards

Only buy what you can afford

I love TJ maxx, and every time I go in, I take my time and look at all of the hand bags that I would never spend over $100 on.

I remember being grateful that my limit was low because for the first time, I could feel the temptation to buy things I normally wouldn't.

If you can pay for it in cash, put it on your credit card, and pay your bill ASAP. Otherwise leave the card at home and DO not add it to your saved cards on your computer or phone.

Pay the balance in full

When it's time to make your budget and you begin to add up your expenses, factor in that you have to pay X amount toward your credit card.

Creditors love to see that you keep your utilization low, and make on time payments, it makes them trust you.

Trust = higher credit limit and higher credit score.

Split the balance into two monthly payments

If your minimum is due on the 25th you can pay half of the entire bill at the beginning of the month and the second half of the bill when your app or website allows you too.

This is typically a few business days later.

You can even split the bill into two pay cycles but you want to make sure that the balance is back to zero before the new month occurs/ your statement is generated.

This is how you avoid those pesky interest fees.

By this point you already have more of an understanding of the do's and dont's of credit cards.

But just to make sure you're extra ready keep reading to find out a few terms that confused me, until I had a basic definition under wraps.

Vocabulary You Should Know

Credit Score

A number that predicts your trust worthiness as a credit user.

The higher this number, the more likely you are to be approved for apartments that run a credit check, or have a smaller down payment to put down, if you choose to finance something.

Think of all the "No money down" ads that are out there

Installment credit:

AKA loans.

This could be taking out a mortgage, personal loan, etc.

Your credit score jumps higher when you have a mixture of both installment and credit cards (revolving). The trick is pay on time and keep the balances as low as possible. When your loan is paid off it may drop your score a few points.

Secured Credit Card:

When you apply and are approved, and the credit company decides how much they will give you to spend.

Credit companies check your credit score and the impact of the search could temporarily drop your credit score by a few points.

Unsecured credit card

When you put a deposit down to be approved for the credit card. It will show on your credit report.

It will say in the card description if your downpayment is your credit limit.

Credit Limit

This is how much you are given to spend on one credit card.

The more on time payments, lower utilization rate, and even the longer you have the card the higher your credit limit can become.


The amount of interest applied when you carry a balance from month to month.

Cash Advance

This is usually given with a secured card. It's money you can get back for having a credit card however, there usually is a fee or interest (APR) charged.

Statement Balance

Enroll in paperless statement balances and save yourself the hassle of getting unnecessary mail.

This document shows the amount that you still have to pay by the time your billing cycle has closed.

Interest is accumulated if the amount on this statement is above zero.

Minimum payment

What you are mandated to pay toward your credit card bill.

It gets bigger as your bill grows and lower as you pay it off, bringing the balance closer to back zero.

Building your credit can be simple and easy but it does however, take time. When my first and only credit card was closed, my credit score dropped dramatically.

I wanted to cry because I had nothing else to boost it back up. I didn't realize that it wasn't the end of the world and I was not failing or deviating from the cliche, book and tv, ad influenced path in life.

Below you will find a few ways to summarize how to easily boost your credit.

Taking out a loan

If you are also in college and run short on tuition funds or need a laptop to do your work remotely, a small manageable loan with low interest, could give you a credit boost in the form of installment credit.

Keep your balances low

Managing your credit balance is the key to spending responsibility. NEVER spend more than you can afford to pay with a debit card if you can help it.

Of course life happens and more often than not families use credit cards just to keep groceries in the house. You can build your credit with as low as $5 a month being spent and paid off.

Pay your bill in full

This is essential for someone who is just beginning to use a credit card.

Before you activate the card, the balance is zero. When you take it to the store use it to buy something you planned on purchasing with your actual money.

If you are an older credit card user looking to fix old habits, begin crafting your method of paying off your debt faster and more aggressively by putting more money toward the bill each month.

If you do not have credit card debt then the tips above will help you to add structure to your spending routine.

It feels stressful now but it is SO worth it in the long run.

Leave the credit cards at home

Once you notice you're carrying over a balance, don't bring it back outside, limit the temptation.

In conclusion your first credit card when used the right way can open A LOT of doors.

It doesn't have to be stressful to maintain a good credit score.

Hit the like button and let me know in the comments what your thoughts are about credit cards.

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Blissful Wallet by Rebekah Gamble 2020

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