how do credit cards work?

[pb4ugo]

I disagree with most of the above.

Lack of responsibility is the bad part, not the credit cards.

I earn cash (or other) rewards on all of my credit cards and don't pay a dime in interest or annual fees.

In response to the credit score comment, available credit is one of the largest factors in the Fico scoring algorithm. All these people that reduced their limits because they saw some quacky advice to do so ended up suffering from a lower credit score. Now that so many people are having their limits cut by CC issuers due to the "credit crunch", they are facing the same scenario.

My advice to OP: start with a small card by a major bank. Citi student card could be a good first choice. Let the balance report ONE time (to show usage) and pay immediately after the statement cuts. This will show usage without having to pay interest. Now, when there is a balance on the statement, the balance reports to the credit report. That will lower your score (available credit issue again). Know when your statement cuts and pay your bill in full before it does. If you don't have the discipline to do this, then the others are right and a credit card should probably be avoided. If you get good at doing this, you will be earning up to 5% of wour spending back in the form of rewards while being afforded the protection paying by a CC gives you.

As it comes time to finance your first car or home, you will pay through the nose if you don't have comparable high credit amounts on your report. A good credit card will get you the comparable credit in short order without paying ridiculous interest (if you follow the pay in full advice).

There are also very active forums on the web discussing credit and usage. Fatwallet is one and creditboards another.