Lesson 05 of 07
Credit cards and debt
A credit card is a short-term loan with a grace period and a very high price. Used as a payment tool it costs nothing. Used as a loan, it is some of the most expensive money you can buy.
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The short version
- Pay the statement balance, not the minimum. Interest starts on purchases once you carry a balance, and the minimum is calculated to keep you carrying it.
- Do the arithmetic once. $1,000 at 24% APR, paying only the minimum, takes years and costs hundreds more than the purchase did. That is the price of the minimum, stated plainly.
- Cash advances are the worst corner. No grace period, a fee up front, and a higher rate from day one. It is what a card looks like when it is pure debt.
- If you cannot pay in full, pay the highest rate first. And stop adding new charges to that card while the balance is there. Splitting the extra evenly feels fair and costs more.
A card is a tool with a sharp edge. Autopay the full statement balance and it never costs you anything.
Next
Six questions on the video.
Watch first, then take the quiz on its own page. Four right is a pass, and your best score is kept in this browser.
After this: Lesson 06, Understanding your credit score