Many new people entering the workforce for the first time wonder what is a credit card?

credit cards

They have no doubt seen their parent’s credit card many times over but the thinking people will want to know precisely what is a credit card before they commit themselves. I mean, it’s a whole lot easier to access their parent’s credit cards as long as the parents allow this to happen. Kids today aren’t stupid!

They have no doubt at some point or other, seen their parent’s struggle to pay-off their credit cards and don’t want to have to go through the same pain.  To understand all the implications, obligations and responsibilities of actually being the person responsible for paying off the credit card, they have decided to fully investigate these requirements before being granted a credit card of their own. My guess is, because you are actually reading this, that you are being one of the ‘wise ones’ and doing your homework first. All I can say is well done.

A credit card is not a “rite of passage” into adulthood.  

Some people think that because they are finally earning some money of their own through having their first job, that this entitles them to a credit card.  Firstly, let’s understand something from the get-go. When it comes to credit cards your only entitlement is the right to pay it off. Not paying a credit card off is simply not an option if you want a relatively peaceful and successful life.

Life without a credit card:

To answer the question of what is a credit card I would have to answer it is a way of life. Trying to live without having a credit card today is near impossible. There are very, very few Hotels or Motels who will accept a booking or give you accommodation without one.  You can’t buy anything online quickly without producing a credit card of some description.  As for renting a car without a credit card it simply doesn’t happen.

When you stop and think of the reasoning behind this it does makes sense. I mean, if you were a car rental business, would you let someone take your car and drive off into the sunset without having some means of recourse if they banged it up? No, I wouldn’t either so in these situations, demanding a credit card does make sense. So, can you imagine what life without one would be like now?

What exactly is a credit card?

A credit card is a plastic card that says you have access to “X” amount of money without having to carry the actual cash money in your wallet or purse.  It acts as a cash substitute. And this is one of the reasons why so many people get themselves into credit debt.

Cash money is still king because when you spend that, then you have no money left. When handling cash money it is easier to see when you are running low and you tend to resist purchasing unneeded stuff. A credit card is a great “enabler” but it often tempts us beyond what we actually need or use.

To answer the original question of what is a credit card I would have to say it is an “enabler”.