Thursday, September 15, 2022
- Advertisement -

Everything Young Adults Need to Know About Credit Cards and Debt

For young adults, getting your first debit or credit card can feel like a huge step towards financial independence. However, teens need to be careful when choosing, as the convenience of credit cards is more harmful than helpful to a large number of teens. Around 52% of Gen Z who accumulated credit card debt say that it often leads to stress, according to a finance feature by TeenVogue. However, we can’t deny that it’s also an important opportunity to build one’s financial responsibility.

Teenagers and young adults should do their research first and learn these important lessons before they think about swiping their first card.

Credit-vs-DebitCard-alignthoughts

Credit vs. Debit Cards

- Advertisement -

While both of these are physical cards that can be used to pay for your transactions, their main difference is that a credit card is tied to a revolving line of credit that the bank has made available to you, while debit directly uses the funds you’ve stored in your account. There’s been an endless debate revolving around which of the two is better, but the truth is that they each have their pros and cons.

For one, The Balance highlights credit cards as a way to build credit, set up automatic payments, and even redeem rewards depending on your card company. But they’re also notorious for high-interest rates and fees. On the flip side, debit cards are perfect for those who want to avoid debt — but you won’t have the ability to build credit or enjoy rewards. This is why the former is more popular.

Getting a Credit Card

If you want to apply for a credit card, then you need to understand the value of a credit score. According to AskMoney’s guide on credit scores, it’s a permanent record of how diligent you are with paying debts and bills. For example, if you pay for the phone and electric bills on time, it increases your score. Your payment history is, however, the biggest contributing factor to your score, accounting for 35% of its calculations. Having a good credit score will give you the best chance of qualifying for a credit card of your choice.

To apply for a credit card simply approach your bank of choice and apply for a card. They might ask for additional requirements, like proof of employment to determine if you really can pay for your credit line, but the process is straightforward and can be accomplished in minutes.

Credit Debt Basics

Debt is perhaps the biggest worry for new credit cardholders. Debt is not all bad, but accumulated credit debt can really bring down your credit score and restrict you financially. As we discussed in our article How to Pay Off a Debt Fast and Become Debt Free, there are two types of debt. Secured debt poses a lower risk to the lender because they’re backed by the loaner’s assets like a house or car. This is why these loans will often have lower interest rates.

Credit card debts on the other hand fall under unsecured debt, as they aren’t backed by assets. Their interest rates are much higher because of this.

To avoid huge amounts of debt, always remember to think before you swipe (or check out). CNBC reports credit card debt to have increased since the pandemic began — largely attributed to the growth of online shopping. This calls for self-control when it comes to spending. Credit cardholders are also advised to keep track of their purchases, pay bills in full every month, and check their billing statements regularly.

The fine print differs from bank to bank, so it’s important to consider the specifics when you apply for a credit card. However, as long as you’re diligent with payments, your credit card can be your gateway to financial independence.

AlignThoughts Editorial
AlignThoughts Editorial
The editorial team at AlignThoughts includes feature writers, researchers, and subject matter experts with rich domain knowledge who are always willing to go the extra mile to deliver quality content. We strive to create meaningful content with a fresh perspective that can leave an impact on your life.

More from author

What Exactly Is Mind Mapping? 5 Simple Steps To Create A Perfect Mind Map

If there's anything that's beyond what we need, it's data in our minds and the world around...

10 Tіps Оn Makіng A Lоng Dіstanсе Rеlatіоnshіp Work

Rеlatіоnshіps takе wоrk, but lоng dіstanсе rеlatіоnshіps takе еvеn mоrе еffоrt and trust. Bеіng sеparatеd frоm yоur...

Working From Home With Kids? Affordable Childcare Options For Working Parents

Are you planning to return to work after maternity leave? Or, maybe you're a working parent who's...

10 Signs You’re Not Drinking Enough Water

Are you drinking enough water everyday? "Water is life!" This is the most relatable phrase you will...

Related articles

Advertisment

Latest articles

Can You Work Remotely And Travel At The Same Time? Here’s How To Do It Effectively

It's no wonder that remote work culture has offered myriad opportunities to reclaim the part of our lives we otherwise would have no time...

How To Build On Strenghts To Create A Super Powerful Team?

While collaboration within a team is necessary to get the job done, every person has a unique talent, and when we combine them together...

How Entrepreneurship And Wellness Can Co-Exist?

The world is changing fast, and so are the ways in which we work. We are more agile, flexible, and independent than ever before....

Why Solo Female Travel Is Booming and How It’s Changing the World?

Solo travel is simply the act of traveling without a partner unaccompanied by children, spouse, or friends. These days solo female travel is a...

10 Daily Habits & Tips For An Integrated Work-Life Balance

As the nature of work evolves, so does the way people balance their professional and personal lives. Work-life integration is one of the biggest...

Latest Videos