The Layman’s Terms Guide to Credit Cards


Hopefully you have found your way to this article because you are hoping to get some straightforward, say it as it is information around the area of credit cards. Sad to say, but most of the world is in debt of some kind, if you are lucky enough not to have any debt whatsoever then you are doing very well for yourself indeed. If you already have debt and it’s manageable then you’re likely just after the credit card information, if you already have debt and it is starting to become or, is out of control, then you should be more interested in the generic advice about reducing your debt found at the end of this article.

Credit Cards 101

Let’s start with the very basics, a credit card is, essentially a form of a loan that you can access at any time and pay the money back on a monthly basis or, in one lump sum. You will want to compare credit cards as each type will have different characteristics in terms of benefits or potential financial risk, the use of a credit card should probably be used for the following reasons.

  1. Help you with some additional funds for emergencies
  2. Provide you with a tool that you can use to improve your chances of being awarded credit services for some of the biggest purchases you will ever make. You should have full respect for your credit card and never spend more than you can afford to pay back.

Change of mindset

Most people will get very excited when they receive their first credit card seeing it as free money, perhaps even going on a little shopping spree that same day, inadvertently putting the wheels of financial pain into motion. A change of mindset is needed, be responsible and have respect for your card and its ability to get you into debt. Physiologically speaking, it can be really difficult to appreciate the value of a credit card in terms of money because all you ever see is the plastic card, oh and some new stuff. 

APR and Interest

It’s far too easy these days for a person to spend money that isn’t theirs and, that they didn’t earn, only to wind up in escalating debt. Often these people end up owing more money than they spent in the first place due to what’s called the annual percentage rate (APR) of something called interest. Often people will get more than one card as time goes by, not only will you become more attractive to lenders if you have a good repayment history, you might become attractive to companies that want you to get further into debt so that they can create revenue for their business.

Interest can be understood really simply as a charge or a fee that the credit provider charges on an annual basis. The fee is referred to as the APR and worked out based upon a percentage of the total loan amount, it could be anything from 0% to double or even triple the original loan. If you don’t fully understand what you are applying for then hold off until you do, taken on board or not, that could be the best financial advice that you ever have.