Sunday, June 16, 2024
mmh

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

- Advertisement -

Credit vs. Debit Cards

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

Why Feminism Is For Everybody And Not Only Women

While many of us consider the concept of feminism being redundant, here I bring in front of...

20 Cool Facts About The Periodic Table

Periodic Table Facts To classify information about the properties of all known elements present on earth, they created...

Healthy Mediterranean Diet 7 Days Sample Meal Plan

The Mediterranean diet meal plan is a part of the local foods belonging to the people living...

How To Choose The Right Accommodation For A Remote Work Lifestyle?

An increasing number of people are interested in extending remote work. For some, this working style has...

Related articles

Advertisment

Latest articles

Is It A Good Idea To Take A Gap Year? Things To Consider Before Taking One

A gap year can be a great opportunity to take a break from your studies/work and explore the world. It can be used to...

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 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...

What Happens When You Don’t Get Enough Sleep?

With the boundaries of work life and personal life getting blurrier, it's important not to mix sleep time with work or socials. Our quality...

Latest Videos