Credit or store cards
In the future, you might apply for a credit card or a store card, to do this, you must be at least 18 years old. A store card only works in a specific shop or group of shops, while a credit card can be used in most places.
Credit cards work by letting you borrow on a credit basis. You can make purchases without paying right away and then pay off your credit card each month. This helps you spread the cost of more expensive items. However, if you don’t make your monthly payments on time, you might be charged late fees, interest rates, or other charges.
Please remember if you don’t pay the balance in full at the end of each month, you will be charged interest on the remaining amount, therefore the item will cost you more than you purchased it for, it will also take you longer to pay back. In addition, missing payments could lead to debt and start impacting your credit score.
Credit limits
Your credit limit is the maximum amount of money you can borrow on a credit or store card. The bank or lender sets this limit based on your income and credit history, helping you avoid borrowing more than you can repay.
A card has a credit limit to protect both you and the lender. It reduces the risk of the consumer getting into debt and the risk of the money not being paid back. When you obtain a credit or store card, the issuer will inform you of your assigned credit limit.
If you regularly manage your account well and make payments on time, you may be able to request a credit limit increase or be offered a higher credit limit. To stay financially healthy, always stay within your credit limit and track your spending.
Overdrafts
You may want to apply for an overdraft on your current account when you are 18. An overdraft is when a bank agrees to let a customer borrow from the bank by allowing them to spend more money than the customer has in their account. The overdraft amount will have a limit on it which is set by the bank.
Some overdrafts are interest-free, especially those for students or graduates. However, going over your agreed limit can be costly. Banks may charge extra fees and interest rates, making this an expensive way to borrow.
Remember, an overdraft is a form of borrowing, and you’ll need to pay it back eventually, just like a loan or a credit card.
Understanding the important role money plays in our lives
Managing your money well is part of the key to a successful future. Learning about money management early on can help you make smart financial decisions.
By the time you get your first job, it’s helpful to already understand how credit cards work, what a credit limit is, and how to avoid impacting your credit score. Keeping your finances in good shape can also help build a positive credit rating and improve your credit reports from credit reference agencies.
Being smart about your spending, like avoiding unnecessary annual fees, using balance transfers wisely, and paying off your credit cards on time can help you stay in control of your money and prepare you for bigger financial decisions later in life.
More money tips for teens
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