Guest Post: Credit Card Report Card

Hi. Munnybagz has been really sick for the last two days and he is sorry he has not been able to update his blog. He asked me to add a post for him. Seeing as how he was asked about credit cards on his radio interview with 1410 CFUN, I thought I would blog about credit cards.

Just like you need a good report card history to get into university, you need a good credit card history to be able to get money loans from the bank. But the only way to get a good "credit rating," as it is called, is to borrow money. So how do you borrow money without having a good credit history that lets you borrow money? You get a credit card.

Credit cards are given to students who don't have any history of having credit. These cards often have low limits. For example, someone who has over 10 years of a good credit rating may be able to have credit cards with $10,000 limits AND be able to get a $200,000 mortgage AND be able to get a $15,000 car loan... all at the same time. A student might only be able to get a credit card with a $2,000 spending limit on it.

Once you get a credit card, use it wisely, and pay it off every month, you will start to develop a good credit rating. Then the bank will know you are safe to lend more money or credit too. Eventually, your credit card limit will increase and you will be able to qualify for other loans, like a mortgage, a car loan, or a business loan. If you don't ever start your credit history the bank won't lend you the money when you are ready to buy your first home - just like the university won't let you in if you don't have your high school report cards.

BUT credit cards have very high interest rates and can end up costing a lot of extra money and stress if not used properly. Never put more on your credit card than you can pay off when the bill comes. You don't want a D- on your credit card report card. For more on Credit Cards from Munnybagz see Hey Kids - Do You Still Want a Credit Card?