Credit Cards 101

If you’ve been using credit cards for years and never once made a mistake, Congrats! That’s Amazing! (a bit hard to believe) but AMAZING! 

However, most people have made a least a few mistakes with their credit cards. This is especially so with the Pandemic. According to statistics, the national average card debt among cardholders with unpaid balances in December 2022 was $7,279. Everyone makes mistakes, so if you’re struggling with credit card debt, here are 2 comforting truths

  1. You are not alone
  2. It’s never too late to get back on track

Your credit has a significant impact on your financial stability, freedom & opportunities. Taking the time to learn how credit works and implementing simple steps will open so many doors for you. 

So if you made a few mistakes or have no credit history, you’re in the right place. Follow these steps & rules to master your credit!

Step 1: Understand your APR.

APR stands for Annual Interest Rate. Your APR represents the yearly interest you will be charged. To avoid interest fees, you need to pay the balance on your credit card in full every month before the due date; so from now on that is your new goal! 

If you currently have credit card debt, don’t panic, you can fix it. Steadily make payments to your credit card debt, focusing on the cards with the highest interest.

If you don’t have a credit card right now or you’re ready to get a new one. Here’s something to keep in mind.

 Most credit cards require…

  • a credit score of at least 600
  • annual income of at least $15,000 
  • A debt-to-income ratio less than or equal to 35%

If you have no credit history, you can use Secured Cards or Student Credit Cards to build credit.

When shopping for a new card, the goal is to find one with a low fixed interest rate (and good perks).


We’ve got a few recommendations for you! All with 0 fees and great rewards!

And click here for more recommendations!


Step 2: Understand your credit score

A credit report is a detailed history of your credit. It comes with your FICO Credit score, a calculated number between 300 & 850 summarizing your credit report.

A high credit score gives you plenty of perks like lower interest rates, better deals from credit card companies, affordable insurance, etc. There are 5 components of your credit score; understanding those components will help you keep your credit score in good standing.



35% of your score is impacted by your Payment History

This means the thing that has the biggest impact on your credit is making your payments on time

The goal is to pay off the balance in full every single month. But if that’s not feasible for you right now, at least make sure that you are paying the minimum balance monthly. Then create a long-term strategy for eliminating your credit card debt altogether. 

Check your credit card company’s website to set up automatic payments. Make paying off your credit card easy!



30% of your score is impacted by your Credit Utilization

When getting your credit card, you also get a credit limit. This varies from person to person and from card to card. Your credit utilization is essentially how much of the credit limit you use. 

To keep your credit in good standing, keep your credit utilization under 30%. If this is hard for you, then it would be good to pay off your card early a couple of times a month. It may also be time to call your credit card company and ask for a higher credit limit.

Maybe you heard of Ramit Sethi and his book I Will Teach You To Be Rich. It’s a 6-week Program to get your finances together and set you up for success! One of the things we like about this book is that Ramit provides you with instructions or even a script for what to say when talking to customer service reps at credit card companies, car dealerships, and many other places where you need to make financial decisions. 

Simply knowing what to say and how to say it when you get on the phone will increase your chances of getting what you want. His book also has tips & scripts for how and when to ask for a higher credit limit, get your fees waived, and even negotiate APRs! Click here to learn more about the book!

Credit Utilization & Payment History are the 2 things that have the biggest impact on your credit, making up 65% of your overall score. So make sure you prioritize them! The rest don’t have nearly as much impact, but here are some tips to know about them.

  • 15% ~ Length of Credit History
    • The longer you’ve been using credit, the better your score will be, so don’t close old accounts unless you have to.
  • 10% ~ Recent Inquiries for credit
    • Hard credit checks will hurt your credit score, but not by too much. Still, avoid applying for new credit cards or loans unless it’s absolutely necessary. Each inquiry will bring down your score a few points for the next few months.
  • 10% ~ Types of credit used (Don’t worry about this)

Step 3: Follow These Credit Card Rules

  1. Don’t purchase what you can’t afford. Treat it like a debit card
  2. Follow the rules in the previous section
    1. Pay for everything on time
    2. Don’t exceed 30% of your Maximum Credit Line
    3. Don’t close old accounts unless you have to
  3. Shop around for the best card out there, with low-interest rates & great rewards. (You can look up a free credit card rewards calculator to help you with your search)
  4. Never use your credit card to withdraw cash at an ATM (Or you’ll have to pay a cash advance fee which is 2-5% of the Withdrawal + interest)
  5. If you have a bad credit history or no credit history and can’t qualify for a new card, you can get a secured card and start building your credit score again.
  6. If you have a lot of credit card debt but a great credit score, do a balance transfer to a 0% interest credit card offered by a different lender


If you want more resources for learning about credit cards or just upping your finance game, check out this free Udemy course Personal Finance 101 for a breakdown on a variety of finance topics. And be sure to subscribe for more TBC content!

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