This week, we have been learning all about credit. We learned about bad credit, good credit, credit reports, credit bureaus, and credit cards. We learned that credit cards can be good, but that they have many dangers. Credit cards are convenient, offer rewards, allow for online shopping, offer purchase protection and fraud protection, and create an opportunity to purchase something that may otherwise have taken a long time to purchase. There are many clear perks that come with a credit, but with great power comes great responsibility. Credit cards have a flip side where the borrower has to pay interest and fees, risk identity theft and borrowing beyond the ability to repay, and undergo a long time period of payment if only paying the minimum payments.
We talked about how picking the right credit card to go with is very important. There were many people like Kyle and Nick who had to work out their financing. Broke Bill led them astray, but Finance Frank put them on the right track to success. Our class worked to find out which offers were the best for them. We noticed that the APR (annual percentage rate) was often 0% at first, but the percentage could jump to over 20% within 15 months. The class found that the perks of a credit card were sometimes there to mask a more taxing set of fees for that particular card. We learned which credit cards offered the most legitimate deals. If you aren't careful with keeping up with payments, then you can end up spending way more money on interest than the original purchase was worth. A person often chooses to use a credit card instead of cash because of the convenience, but this means the person will be accumulating interest on items that they could have easily purchased in cash. This person is using the credit card to buy items that they will need to spend even more money on later.
The fact that we learned about credit cards has already proved value to me. I use my parents' credit card and I often find myself thinking that it is so much easier to just use it for purchases so that I don't need to handle any cash. I now know that this could be a very dangerous habit. I have no idea how my parents pay all their credit card bills, but they do and I now have a deeper appreciation for them. I think that the more we learn about Personal Finance, the more and more valuable information we accumulate. I know that I will need to be careful about making all my payments on time so that I have good credit history and that I need be very selective when choosing which credit vehicle I want to use.
Works Cited
"Credit Card: A Friend in Need or A Foe Indeed?" RinggitPlus. Web. 15 May 2014.
It's especially important to realize how being in credit card debt can affect someone, as in Mrs. Weser's example of 7 years. The discussion of identity theft can also bring up how outdated U.S. cards are. This sums up the week nicely and I really like the spiderman quote.
ReplyDeleteI really enjoyed the cartoon because that is what the world needs if we are to get out of personal debt. It is important to see through that mask of benefits in order to find out if the fees are really something I can Afford.
ReplyDeleteThat's really good that you realized the effects of using your parent's credit card. I had never known either the shocking amount of fees that a credit card carries, and the threat of missed payments. I'm glad that we learned about all the aspects of credit cards before I went out in my college years and got one without considering anything else.
ReplyDeleteI too started to appreciate my parents and understand how they used their credit card after this week. I've used my mom's credit card a couples times and just holding it, I was nervous and felt a lot of responsibility. There are definitely pros and cons to having one.
ReplyDeleteAni I liked that you showed the cost and benefits of having credit. Credit can be a good thing and people should use it BUT use it wisely.
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