Credit cards

The Beginner’s Guide to Credit and Credit Cards

As a student, some days you feel like a confident adult and other days you realize you have no idea what you’re doing – and nothing makes the second feeling as hard as managing your finances. personal. To save you an internet search or two, we’ve partnered with Bank of America to break down credit and credit card details.

What is credit?

Basically, credit is borrowing money that you pay back later. In short, credit cards allow you to borrow money from a bank, while debit cards withdraw money directly from your own bank account with every purchase. With credit, you receive a fixed amount that you are allowed to spend, or essentially borrow, before paying it back at the end of the month. Different rules and deadlines also dictate how much you may have to pay in interest (a percentage of the amount you borrowed).

You may also have heard of a credit score, which is like a transcript of how you’ve used credit in the past. Your credit score increases (the higher the better!) when you’ve used credit responsibly, and having a good credit score comes in handy when looking for apartments or applying for a loan for a home or a car. To build credit, it’s important to practice responsible spending habits. Only making purchases you can afford and paying off your credit card on time and in full will help boost your score.

So, should I take a credit card?

Getting a credit card is a big step, and you’ll want to make sure you’re ready to manage your credit before getting one. It’s important to fully understand how your credit card works and make sure you’re budgeting to pay it off, otherwise the benefits of establishing credit early can be quickly outweighed.

Before getting a credit card, think about the types of purchases you plan to make on your card and how you will pay for those purchases. You should strive to pay your credit card balance in full each month, which will give you the benefits of a credit card without any interest charges. If you’re unable to pay the full balance, you’ll need to pay at least the minimum amount each month, which varies by card.

How to choose a credit card?

There are thousands of credit cards to choose from and each one has different variables such as credit limits, interest rates and annual fees. Each card also has different types of rates that you will want to understand before applying for a card. Many credit cards also have rewards programs that allow you to earn different types of rewards like points, cash back, or airline miles.

When shopping for a credit card, you’ll want to compare them to find the right card that meets your needs – whether it’s a low interest rate, travel benefits, or no annual fee – and helps you increase your credit score by demonstrating responsible use of credit over time. For example, the Bank of America Customized Cash Rewards Card for Students offers flexible rewards for earning money on everyday purchases, while helping to build your credit when managed responsibly.

Getting a credit card doesn’t have to be a daunting process! Fortunately, Bank of America has several resources to start your financial journey. Learn more here.

If you enjoyed this article, check out the other personal finance articles we have in our Finance 101 Hub sponsored by Bank of America!

This is a sponsored feature. All opinions are 100% sourced from Her Campus.