Question : How does a credit card work and why do I have to get one?
I just turned 18 and I am trying to get my own place but they said I need to have good credit. To have good credit, they said I have to build good credit, but the only way to build good credit is to have good credit. Why is that? I was looking at credit cards and purchases become way more expensive when you buy them a credit card. So why use one? But to build credit you need to use one. Am I mistaken? Could someone explain how a credit card works please?
- asked by Brandi
All Answers:
Answer #1
1. With most credit cards, a purchase does notbecome more expensive if you use the card only forpurchases and pay the entire balance shown on thecredit card bill promptly. (It does become moreexpensive if you also use the card for balancetransfers or cash advances or if you pay only theminimum balance or pay late.)2. You do not need touse a credit card to build credit. You can buildcredit merely by having a credit card, even if youdo not use it. I believe that they count anymonth in which you do not owe anything, and aretherefore required to pay $0.00 as a month inwhich you paid the required amount on time (I knowthat is illogical; I did not make the rules).
- answered by stephenweinstein
Answer #2
To get a good credit rating you must have obtainedand used credit. There are several ways to do thisbut getting a secured credit card and nevercharging more than 1/3 of your limit and paying atleast double the minimum payment every month ismerely the easiest way to build credit.Right now,to rent an apartment, you need a co-signer withgood credit.Generally it takes 2 years from whenyou first get a secured card and being good withit, to be considered to have any sort of creditrating.A secured card is where you take say $500and put it in a savings account in a bank and theyfreeze that amount for two years and then issueyou a credit card for that amount. After the twoyears, if you have been responsible with the card,the account is unfrozen and you get the moneyback. If you have been irresponsible, they use themoney in the account to pay off the card.When Ifirst moved to LA from Canada, I had no credit inthe eyes of US banks and I had Wells Fargo freeze$1500 for 2 years to re-establish my credit in theUS.
- answered by chuckles951
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