Credit scores & debt, decoded
Credit can help you rent an apartment or buy a car someday — or quietly cost you thousands. The rules are simple once you see them.
Credit = borrowed money
A credit card lets you borrow money and pay it back later. Pay the full balance each month and you pay zero interest.
Carry a balance and you'll pay APR — often 20–30% per year. That's how a $50 pizza night turns into $70.
The minimum payment trap
Card companies show a tiny 'minimum payment'. Paying only that keeps you in debt for years, and most of what you pay goes to interest.
Your credit score
A credit score (300–850) shows lenders how reliable you are. The biggest factors: paying on time, and using only a small part of your limit (under 30%).
You can start building credit at 18, or earlier as an authorized user on a parent's card.
Real example
Alex's $500 headphones
Alex, 19, buys $500 headphones on a card with 24% APR and pays only the $25 minimum each month.
- Price
- $500
- Months to pay off
- ≈ 26
- Interest paid
- ≈ $145
- Real cost
- ≈ $645
Remember this
- Pay the full credit card balance every month.
- Minimum payments keep you in debt and cost a lot.
- On-time payments and low usage build a strong score.
Quick quiz
Did it click?
If you pay your full card balance every month, how much interest do you pay?
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