Financial Adulting

CHAPTER 13All About Debt

Now we move into the wild world of debt. And believe me, it is a wild world. More than 191 million people in the United States have credit cards, and 120 million of those (almost half of all adults) have credit card debt, making credit cards the most common form of debt. BIPOC have disproportionately more credit card debt, and that debt comes with higher interest rates.

I have a love/hate relationship with credit cards. Some use them as a tool to pay for vacations with points. For others, having the ability to use a credit card to bridge the gap when cash isn't available is a lifeline (albeit an expensive one) because there aren't better options available – and nearly one in four people in the United States can't get approved for a credit card.

When we do get a credit card, it doesn't come with a manual or even any directions. And considering they can change the financial trajectory of our lives for the worse (or much worse), that's a big problem. Understanding how credit cards work can help us make informed decisions. You know … knowledge is power and all that.

What Are Credit Cards?

A credit card is a revolving loan from a bank or other institution. You can use the card to pay for things, pay the balance down, and build up the balance again. It's up to you. And that's why it's called a revolving loan. The loan comes with a plastic card (or other material) that allows you to make purchases. You are given a certain credit limit, which is the maximum ...