Credit cards can be an excellent financial management tool
when used correctly. However, credit isn't always easy to understand. ASI
Federal Credit Union is committed to empowering our members to make better
financial choices, so we've created a primer on the basics of credit card use.
Check out our handy guide below to learn more about credit cards and how to choose
the best options for your financial needs.
How Do Credit Cards
Some people think credit and debit cards are the same,
especially because you can use either at most points of purchase. However, this
is not the case – your debit card gives you access to the money inside your
checking account. A credit card, on the other hand, allows you to borrow money
from the credit union or bank. You can use it to make purchases or pay bills, but
you have to pay that money back later.
When you get approved for a credit card, you’ll be given a credit
limit. Some cards, typically those designed for students and individuals who
need to build credit, have small limits. Others extend substantial amounts of
credit for those with strong credit scores. There are also cards that allow you
to earn rewards for the purchases you make.
Payments and Interest
With a credit card, you'll gain the ability to break down
payments for purchases over time. Most credit cards have a minimum monthly payment,
which makes it easy to manage funds at your own pace. For example, if you spend
$100 at the store with your credit card, you can choose to make the minimum
payment that month, pay half of the bill or pay in full.
It's also important to remember that your purchases will be
subject to an annual percentage rate (APR). Your APR determines the rate of
interest that will be paid over time and can range in size depending on your
card and credit history. Interest will be added to your balance during each month
it's not paid in full, so over time you will pay more than the original
purchase price. This may be especially important to keep in mind if you intend
to make only the minimum payment each month.
Types of Credit Cards
There are many different types of credit cards available
from banks and credit unions, as well as retailers and more. A few of the major
Unsecured Credit Cards
This is the most popular type of credit card. If you have
good credit, you can apply for one, get approved and start using it right away.
Secured Credit Cards
Secured credit cards require a down payment. These are a
great option for individuals who have no credit or poor credit.
Student Credit Cards
Students attending an accredited four-year university can
apply for a student credit card. These cards usually have low lines of credit
and minimal rewards. However, they’re an excellent way for college students to
start building credit.
Apply for a Credit
ASI Federal Credit Union offers a variety of credit cards, plus
offerings, personal service and educational resources. Stop by your nearest ASI location
today, or meet with one of our financial advocates in Westwego or Mid-City for
comprehensive banking assistance for all your credit card needs.