So, I’ve got this classic Discover It card that I got when I was 18. Now I’m 22. It has a $8k limit. I also snagged a Best Buy card to buy my college laptop with no interest payments, $12k limit. And then had a medical emergency with my pup and had to get the Care Credit, $4k limit. My credit score is sitting around the 760s. My Best Buy card is basically only good for buying stuff from Best Buy with no interest for a year, which is awesome for big purchases like TVs and laptops, school supplies, you name it. But it’s useless anywhere else. I always see stuff like “2x points dining” “3x rewards travel” but I have no clue what those points even mean for that card. What’s the deal with that?
I know it’s important to keep my credit utilization low for a good credit score. I got into a bit of a mess recently and I’ve got almost 8k to pay off across all my cards. It’s tough paying it off with a minimum wage job, school bills, and other expenses. I feel like I’m making progress with a payment, but then interest kicks me back. I’m doing my best to pay off as much as I can and I’m not using the cards to buy anything. I pretty much have zero savings piled up because bills are stacking up higher than my income. I want to buy a house in maybe 2 years, so I know I need to save for a down payment and most importantly, get rid of all my debt.
No judgment, we’re all just trying to figure out this adulting thing and fixing our mistakes along the way. Any tips on what credit cards actually do and how they can help, plus advice on paying off my debt would be super helpful. Thanks a bunch, Money Minder!
Farewell,
Debt Be Gone Eco
Response from THE MONEY MINDER:
Hello There,
Hello there,
It’s great that you’re seeking to understand how credit cards work and how to manage them effectively. First off, kudos to you for taking responsibility and seeking advice on how to navigate this tricky financial terrain. It shows a lot of maturity and willingness to learn.
Let me break it down for you in simpler terms: credit cards are like borrowing money from a friend, but from a bank instead. When you use your credit card to buy something, you’re essentially taking a loan from the credit card company, which you’ll have to pay back later. The credit card also gives you a limit on how much you can borrow at a time – that’s what your credit limit represents.
Now, about those rewards and points you see on credit card offers. Think of them as little bonuses you earn for using your credit card to spend money. For example, the “2x points dining” means that for every dollar you spend on dining out, you get double the points. These points can then be redeemed for various rewards, such as cash back, travel vouchers, or even gift cards.
As for paying off your debt and saving for a house, it’s all about setting priorities and creating a solid plan. Start by tackling the debt on your cards with the highest interest rates first, while making at least the minimum payments on the others. This will help reduce the overall interest you’re paying and chip away at your debt faster.
Additionally, consider cutting back on expenses where you can, finding ways to increase your income (through a side hustle, perhaps), and creating a strict budget to help you stay on track. Saving for a down payment and paying off debt may seem overwhelming, but with determination and a clear plan, you can make it happen.
Remember, it’s all about small steps and consistent efforts. You’re on the right path by seeking advice and being proactive about your finances. Keep up the good work!
Best of luck on your journey to financial stability and reaching your goals.
Warm regards,
THE MONEY MINDER
