Hi everyone I'm Laura Adams and you're listening to the Money Girl

Podcast. Credit cards are financial tools that can save you money or completely ruin your

finances depending on how you use them. One of the biggest money mistakes you can make is to use a credit card without really

understanding how it works.

I'll tell you what you need to know, so you never allow a credit card to get the best of

your personal finances. I'm sure you already know

that a credit card is a financial product issued by banks and other financial

institutions that allows you to make purchases, take cash advances, and transfer balances from other accounts.

I'll tell you more about balance transfer cards in just a moment.

When you're approved for a credit card, you're given a line of credit, which is typically the maximum balance you can accumulate on the card.

Many people use the terms credit card and charge card interchangeably, but they're not the same.

A charge card requires you to pay off your balance in full each month.

A credit card allows you to carry a balance indefinitely, as long as you make the minimum monthly payments.

The money you owe on a credit card is subject to an annual percentage rate or a PR that's called a finance charge.

Each card company has different terms that vary depending on the type of card, your credit score, and the type of transaction you make using the card.

For instance, you might be charged 11.99% for new transfers,

transfers, and 26.99% for cash advances.

If you don't realize that it's outrageously expensive to take a cash advance on a credit card,

you could end up with a massive bill that you can't pay off.

When you make more than the minimum payment,

the card company generally has to use the excess to pay down your highest

interest balances first. That means the money would go towards reducing your

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