Lesson 3.1: Credit Cards & Credit Scores

Key ideas from the lesson

• Pay the full statement balance by the due date and a credit card costs you $0 in interest — that's the grace period working for you. Pay less, and interest is charged on what's left every month.
• The minimum payment is designed to keep you paying for a long time: early on, most of a small payment is eaten by interest, so the balance barely moves. Double the payment and you pay a fraction of the interest.
• Read every fee — late fees, returned-payment fees, cash-advance fees — and watch the penalty APR: one late payment can push your rate up on your existing balance.
• Your credit report lists your accounts, balances, on-time and late payments, who has checked your credit, and anything in collections. Lenders, landlords, insurers and sometimes employers read it.
• Your score comes from five factors: payment history (about 35%), amounts owed — utilization (30%), length of history (15%), credit mix (10%), and new credit (10%).
• Under 21, an issuer needs proof you can pay on your own income, or an adult co-signer. Many people start as an authorized user on a parent's card, or with a secured card backed by a deposit.

Why this helps

Lesson 3.1 teaches you to read the system from the inside — the report, the score, and the trap built into minimum payments. These two sites are the system's front doors: the official place to see your own reports, and the CFPB's plain-language guide to how cards really work.