Hello Friends, I hope all is well with you! I am going to be going over another type of debt – credit cards. You have probably heard all of the scary stories of this type of debt, and most of them are true. Credit cards are one of the most dangerous types of debt because people might think it’s “unlimited money.” This is far from the truth, and you should not think like this. Credit cards shouldn’t be scary or intimidating; they can actually give you some rewards, but you need to know how to use them correctly. I’m going to try and provide you with as much information as possible. Grab your pen and paper and let’s get started!
What are Credit Cards?
Mr. Nahas, what are credit cards? I love the question! Credit cards are a piece of plastic (sometimes metal) that you use to spend money that is not yours. What is mean by this is that the entity that issued you the card is basically giving you a loan through a piece of plastic. When you use the credit card, you aren’t using your money but rather the issuer’s money; they are letting you use their money to pay for your expenses. This is type of debt is considered unsecured, meaning there is no collateral. This type of debt is set-up differently than other types of debt. With other types of debt, you apply each time you want to take a loan but with a credit card, you apply once and if approved, the issuer gives you a revolving credit and sets a limit. Now you might be wondering what revolving credit is, which is perfectly understandable. Revolving credit is a type of loan that lets you use the funds up until the limit that the issuer set is reached. I think an example would help clarify this. Let’s say that your credit card issuer gave you a credit limit of $1,000. You are allowed to use the card up until you reach the limit and once the limit is reached, you can’t use the card again until you pay off some of the balance. Let’s say you used your whole limit of $1,000 and then paid off half the balance, so now you are at a balance of $500. You can only use $500 of your credit card before you can’t use it again. Basically, you use the funds, you repay the funds that you used, and then you can reuse the funds again; it’s a circle.
What you need to know about credit cards
There is some information that you should be aware of when considering a credit card. They are:
How to Apply for a Credit Card
Mr. Nahas, how do I apply for a credit card? Fantastic question! Credit card application are easy to fill out, and sometimes you are even able to get a decision in a couple of minutes. Other times, the issuer will need to take a closer look at your application.
Although the application process is simple, the issuer will still need to verify some things like:
I hope that I provided you some valuable information on this topic. It’s important to note that you should use the credit card responsibly because the last thing you want to do is keep gaining debt and not gain any wealth. This is a bad debt; it destroys your wealth instead of building it. Just be careful! If you have any questions or need me to clarify anything, post a comment and I will reach out to you as soon as I can. Thank you, friends, for stopping by! Take care and see you soon!
P.S. Don’t forget to like, comment, subscribe to my email list, and to share this so I am able to help as many people as possible!