You’re likely familiar with this story; a hungry man is standing near a pond of fish. Do you:

a) give him three fish to eat

or

b)  teach him how to fish

Obviously, the latter because it encourages his independence and self-sufficiency.

Analogous to the above tale,  financial literacy is an incredible tool that can help you become self-sufficient. However, financial literacy is hardly a discussed topic, especially for young adults.

I’d like to empower you with some basics of financial literacy, today’s topic: credit cards.

Firstly, in order to understand a credit card, we must understand the difference between debit and credit.

Debit: is money that comes from a personal bank account, credit: is money that is lent to you by your bank

However, credit cards have a catch, your bank does not lend you money for free. They will charge you an APR, an annual percentage rate, if you do not pay off your borrowed balance by the due date. As you can imagine, incurring an interest rate by not paying off your monthly balance becomes very expensive very quickly.

If you can manage your spending, not spending more than you have, you benefit from percentages and bonuses on what you spend. This comes in the forms of rewards depending on the card you get. As well a way to build a credit score which will benefit you in the future as you make bigger purchases.

Do credit cards purposefully play to the downfalls of human nature of spending more than you have? Yes.

So it’s up to you to ace the credit card game by paying off your monthly balance in full to avoid running up a balance.