Poll: 67% say personal finances should be needed in high school | Credit cards

Poll: 67% say personal finances should be needed in high school |  Credit cards

A mid-February poll by US News & World Report shows that more than two-thirds of respondents believe a personal finance course should be a requirement for high school graduation.

In addition to this number, another 26% say it should be offered at least as an option in high school. According to Next Gen Personal Finance, 21 states require at least some personal finance instruction as part of their high school curriculum, but only 10 states require a one-semester personal finance class.

The survey also shows that most young adults do not receive their first credit card under the guidance of their parents. Over 56% of survey respondents received their first credit card on their own either during college or after graduating from high school.

How much did you know about credit cards before you used them?

When asked if they understood how credit worked when they started using credit cards, 52% of respondents said yes.

But almost a third say they “somehow” understood the loan, but did not fully understand, for example, the risk of having a balance. And 16% say they didn’t know how credit cards work when they get their first card.

Credit is not intuitive, and people often don’t know how big the literacy gap really is. For example, the survey shows that 58% believe that having a balance increases your credit score.

Why you shouldn’t have a credit card balance

The idea that you can’t build a great score without having a credit card balance is one of the biggest myths about credit scores. Having a balance means that you will pay compound interest on your purchases.

Indeed, you can build a great free score. Most credit cards have a grace period, and if you pay off the full balance within that period, you receive an interest-free short-term loan.

Pay the bill in full by the due date each month. Over time, you will develop an excellent score and run out of debt.

How To Avoid The Worst Credit Card Mistakes

Although 11.4% of respondents say they did not make a major mistake, the vast majority cite what went wrong when they used the loan.

Here are the top four credit card mistakes listed by survey respondents:

  • Late payment of the invoice: 21.8%.
  • Making a high balance: 21.7%.
  • Making only the minimum payment: 18.6%.
  • Using too many credit cards: 12.4%.

Let’s take a look at each of them and I’ll show you how to avoid making that mistake yourself.

Mistake no. 1: Late payment of the invoice

Payment history represents 35% of your FICO score. Nothing puts you in a credit crunch like missing payments. And the higher your score when you miss a payment, the higher your score.

Consider that timely payments are the most important rule for credit health. Pay all your bills on time and set the stage for an excellent credit score. The second rule you have to follow? Don’t wear a balance!

Mistake no. 2: Performing a high balance

I mentioned that you don’t have to have a balance to build your score. But there is another reason why it is important to pay attention to the amount of your balance.

You have a credit utilization rate, which is the amount of credit you used compared to the amount you have available. Your credit usage is 30% of your credit score, so it’s right behind your payment history. To avoid lowering your score, keep the ratio below 30%.

Here’s an example: if your credit limit is $ 1,000 and you have a balance of $ 500, then your usage rate is 50% (500 / 1,000 = 0.5). Too high!

You want to have a balance of no more than 30%, and in this example, that means a balance of less than $ 300 (300 / 1,000 = 0.3). However, to really increase your score, keep your ratio below 10%.

Mistake no. 3: Make only the minimum payment

If you can only make the minimum payment, make sure you pay the bill by the due date. This is the minimum you need to do.

But if you pay only the monthly minimum on a regular basis, you will end up in debt. The compound interest makes the balance increase rapidly. Stop using credit cards and focus on paying more than the minimum amount until you get rid of debt.

Mistake no. 4: Using too many credit cards

I often see consumers asking for more cards (or other types of credit) in a short period of time. There is a belief that increasing the amount of credit you have will help you get an excellent and faster score.

If you use credit responsibly, it is certainly a good idea to have several types of accounts in your account, such as credit card accounts and a mortgage or car loan. But the most important thing to do is to pay your bills on time and keep your credit card usage rates low. If you end up with more credit than you can bear, it will lead to mistakes.

So take a deep breath after your credit card is approved. Wait a few months before applying for another one. Focus on using your current card to develop good lending habits. Once you’ve mastered a book, you might want to consider adding another one.

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