meet jasmine. jasmine is a college studentattending state university. like many college students, jasmine has a lot things she needsto buy: books, laundry baskets, food, and so on, and she can pay for those things withtwo types of money: debit or credit. debit is money that comes from a personalbank account. credit is money that is lent to you by your bank.
First Premier Secured Credit Card, for example, let’s say jasmine has beenusing a credit card. each time jasmine uses the card to buy something, say a $100 textbook,her bank is loaning her the money. while that sounds nice, be warned, the bank isn’t givingjasmine this money for free. they expect her to pay a certain amount of money each month,called interest, if she doesn’t totally
pay off her balance by the due date. as youcan imagine, this can get very expensive very quickly, especially when factoring in thehigh annual interest rates, or aprs, that are charged by these companies. however, there is a solution to this ratherscary problem. as long as jasmine always pays off her balance in full by her monthly duedate, she’ll never pay a cent of interest. jasmine is shocked and thrilled, but stillisn’t quite sold on credit-cards. after all, with all their flaws, are they reallyworth using? the short answer: as long as you avoid runningup a balance, definitely! so why is that?
well, “free money†for starters. mostcredit cards offer their users rewards, like cash back or airline miles, each time theymake a purchase. for example, let’s say jasmine’s credit card comes with 2% cashback.that means if jasmine spends $500 per month, then at the end of the month she’ll automaticallyget $10 back, no questions asked. then, if that wasn’t good enough, responsiblyusing a credit card also allows jasmine to build a great credit score. this is a calculatednumber between 300 and 850 that summarizes your credit history, covering everything fromyour payment history to the age of your accounts. while we’ll teach you more about your creditscore, including how to get and improve it, in our next video “credit scores and reports101â€, just for now know that most credit
cards actually require a credit score of atleast 600, plus at least $15,000 in annual income and a reasonable debt payment to incomeratio, generally below 36%. however, thankfully for jasmine, who lacksboth credit history and a full-time job, she shouldn’t have a problem getting a studentcredit card. in fact, the online application will take all of five minutes. she’ll justhave to be a full-time student of at least 18 years of age, with either a small amountof income, like from a part-time job, or a creditworthy co-signer. however, at this point we have to say, becareful. taking on a co-signer is no small matter. the account is still in your name,so any credit mistakes are on you and your
co-signer, plus your co-signer is even liablefor any of your missed payments. if jasmine isn’t quite ready for that levelof responsibility, she can instead be added as an authorized user to her family’s account.not only will this allow her to get her own credit card, but in a few short months thecredit bureaus will treat her parent’s credit score as her own. sounds pretty great right? well, this strategyisn’t a cure-all. even though jasmine isn’t liable for payments on the account, her parentsstill are, plus many lenders will want to see you successfully handling credit on yourown before giving you a major loan. hopefully you and jasmine now understand thebasics of credit cards. be sure to watch our
next video, which covers everything you needto know about credit scores, and be sure to check out our website, where you can findmore educational materials, your free credit score and great credit card recommendations.
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