Whats good?

What do I need to know?

Share your experiences.

Also I have no idea how a credit card 'works' so if someone can explain it to me like Im a 5 year old Id appreciate that.

Thanks

The only thing good about a credit card, is it allows you to buy things with a convenient form of payment, and it allows you to spend in an emergency.

If you learn nothing else from this thread, learn this please:

NEVER EVER Carry a balance on a credit card.

I use one all the time however, as it's how I buy things online. It's also a lot faster to swipe a card at a fast food restaurant then it is to pay with cash. I almost never have cash on me anymore.

Just make sure you pay the full balance every month.

So, how it works:

You get a line of credit, usually for your first card, it will be between $500 and a few thousand dollars. As you show responsibility, that number climbs. I think mine is at $15,000 or something.

They will give you a ridiculous interest rate most likely. Something in the high teens after the in introductory rate expires (if there is one). What this rate means, is that's how much they will charge you each month for whatever balance you carry. Some cards have a annual fee. Stay away from those.

So let's say you have a card with a limit of $2000, and you spend $200 on it. When you get your bill, you pay the $200. I use my credit cards site to pay from my checking account. I can pay the bill in seconds, know the latest amount, and it's free (no stamp).

when you get your bill, they might say you only need to pay $20. If you do, you will carry a balance of $180. If your interest rate is a 20% APR, That will be $180 * 20% / 12 months. That's $3. Doesn't seem like much, until you get in the routine of this, it creeps up $1,800, and your now paying $30 a month just to keep it from going up.

If you pay off the entire $200 in the payment cycle it's due, there is no charge to you.

I hope that helps.

I tried to apply for a credit card, but I have to be at least 21.

Don't pay the minimum as TheRealMafoo has said.  If you can, try to pay it all off right when you get the bill.  Obviously don't miss payments.  You are given a credit line for how much you can spend, so basically don't go over what you have and pay on time.  Mastercard is good, what are you getting?

Here's my opinion on credit cards: Don't get one.

It's too easy to fall into debt and if you're going to pay the full balance every month like Mafoo said then why not get a debit card? I have a Debit Mastercard, exactly the same as a credit card, you can use it online and where ever Mastercard/Visa is accepted and you're using your own money, no need to worry about any bills or interest etc..

It's the smart way to go unless you want the flexibility to be able to make a large purchase without having to save for it and pay it off (obviously this is going to cost you more in the long run due to the high interest rates on credit cards). May I ask why you're interested in a credit card?

I agree with everything you said. I would just add one advantage to a credit card. Theft.

If your debit card info is stolen and used, you can still dispute the charges like you can with a credit card, but the funds are removed from your account until the dispute is over. For a lot of people, that's hard to live with.

Credit Cards are a really good way to start building credit if used responsibly. Because I had a Credit Card for a couple years and always payed it off on time my credit was in great shape when I applied to rent my first apartment and buy my first car. This allowed my to get both without a cosigner and with a very low interest rate on the vehicle, a lot of my friends with bad or little credit had to get their parents to cosign on their first place and pay higher interest rates on their cars.

The problem with credit cards is that a lot of people use them to live beyond their means, it's easy to say I really need this new shirt and even though I don't have the money for it yet I'll have it when the credit card bill comes due, then when the bill comes you've spent the money on something else, can't make the full payment and start the wonderful process of paying very high interest payments as your debt continues to expand due to all those other things you must have but can't afford because you still have that initial debt from that shirt to pay off. Also if you screw up and send it a payment late they'll hit you with a late payment fee as well as interest.

So in short: get one if you can, use it very sparingly at the beginning and ALWAYS make sure you have more than sufficient funds in your accounts to cover your purchases. Also if your credit card is stolen it's much easier to dispute fraudulent purchases than with a debit card,  and unlike debit you aren't out the money until the bank re credits your account.

Using your bank card as a credit card doesn't give you any credit, considering the money is still directly pulled from your account automatically within a few days, right?

Use a debit card for everything except the really expensive purchases that you need the insurance/safety net on.

On those, pay the balance off asap and never buy anything you couldn't afford immediately via a debit transfer instead.

Credit card companies only make money from you when they can charge you interest or fine you for late payment. Don't let yourself get in to either situation and it's fine.

Does Canada need a good 'credit rating' to get a card? I know the US does but the UK does not. If it does, you'll need to start with tiny purchases and paying it off fast to be able to up your credit limit to something workable.

I have 2 CC's - the one I use the most is a TD Visa "Rebate" card.  I charge pretty much everything on it, however, and this is the key point I never carry a balance month to month - since I have access to my Visa CC's online and I bank through CIBC I check my balances a couple times a month and pay them off (usually twice a month) this way I do not incur interest charges.

The rebate card is nice as it gives like 2% cash back on all purchases made over the year (you get a one time payment in January).  So if I spend $10,000 on my CC in January I will get $200 back.  If you are late paying though they can deny you the rebate.