Credit Card 101

Credit Cards.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 Work?

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 types include:

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 Card Today

ASI Federal Credit Union offers a variety of credit cards, plus diverse financial 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.



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