This glorious plastic card that allows me to get what I want when I want it.

It's amazing— an outfit here, an outfit there.

I get to tap my card, and think about the money later.

But if I'm not careful, I can get into some serious debt.

Let's see what people have to say about their finances:

Do you have a credit card?

I have just a debit card right now.

-Okay, so what do you... -I don't trust myself with a credit card at the moment.

What do you know about credit?

Do you understand how it works?

Actually, not really.

I don't know much about credit.

Yeah.

I am clueless on that.

Do you know why it would be good to have a good credit score, like, why it's helpful?

Yeah! It's like everything— so you can, like, get a car, get like a place to live, like, be able to purchase things.

It kinda kills me that, like, you have to have credit to, like, survive in this country.

I'm like, "Why can't I just live off my debit card?"

So, what is credit, and how can you make it work for you and not against you?

This is your world on money.

What is going on?

So, I did some digging to find the credentials of credit, and this is what I found.

Credit is the ability to borrow money or access goods or services with the understanding that you'll pay up later.

There's an agreement between the borrower and the lender.

Having credit enables consumers to buy goods or assets

without having to pay for them in cash at the time of purchase.

Believe it or not, credit was even a thing of the past, before banks, retailers, and others extended credit to people.

One of the earliest records of credit and the concept of lending can be traced back to ancient Mesopotamia.

Back then, planting a single seed would yield a grain plant with hundreds of seeds on harvest days.

So, farmers began to borrow seeds issued against a later payment.

This was used in a similar manner with animals, where the repayment was issued with the birth of a new calf.

Instead of borrowing grains or animals, today, we can borrow money and pay it back later.

Now, there are many different types of credit,

and I'll mainly be focusing on consumer credit

because it pertains to most people today.

Consumer credit means, for example, credit cards.

and as a good, neutral Libra,

I won't be recommending you to be for or against credit cards,

we'll just be discussing it because...knowledge.

Well, hello, Joe.

Thank you so much for joining me here today.

I had to learn all this stuff the hard way,

so I'm super happy to help everybody learn it in an easier way than I did,

'cause if I can come back from that, so can you.

All right, so since you're a money management expert, could you tell me about credit?

Do I need it?

Well, I know about credit because I messed mine up myself.

And the biggest lesson that I think we all need to learn is that credit is a paradox.

We certainly need it to buy things like a car to get to work, maybe, or a house for a roof over our head—

but we want to try not to use it as much as possible.

In essence, credit means we're trying to use other people's money instead of our own—

and that can be really, really dangerous.

Specifically thinking about credit cards, what are the main do's and don'ts?

The basic credit card rule is this:

Do not use the credit card, if you don't know where the money's going to come from to pay it.

If you don't pay off your credit card on time, they're going to charge you this ginormous interest rate:

often 18, 21, 25% or more.

So, you want to have some systems in place.

I like setting up automatic payments, so at the very least, you don't get behind on your payments.

That makes sense.

Can you define what a "credit score" is and why is it important?

A credit score is the way that any company issuing credits decide whether you are somebody they should be loaning money to or not.

There's three main factors that make your credit go up or down:

The first one is paying that bill on time.

If you at least pay the minimum payment, you're going to be great.

The second is utilization.

If they let you borrow $500, have you already borrowed all of it, or have you borrowed very little of it?

If you borrow very little, they're much more likely to think that you don't need the money,

making them want to loan you more.

And then the third is how long you've actually had credit history.

If you've had it for a long time, that's going to make it go up quickly.

If you haven't had credit very long, it's going to take longer to build.

So, should I be using my credit card for everything, or just small versus big purchases?

Using your credit card means using it responsibly,

and a great way to get started with credit is to use it just for small purchases, not for big purchases.

If I'm buying big things on my credit card,

it's so easy to get behind on those payments.

But if I'm using it for little things on a monthly basis,

I'm showing the credit card company I'm responsible, number one.

And then the second thing that it does is

you're not going to owe these monster interest rates, sometimes, to some credit card company;

that's extra money coming out of your pocket you don't need to spend.

But the third thing is, and maybe the most important when you're young,

is that allows you to build a great credit history

so that you get higher amounts of credit later on when you might need more.

That makes sense.

Thank you so much, that was such a helpful answer.

I am fulfilled with credit wisdom now.

Woohoo, high five.

The most important thing about credit is it's very useful to build a good credit score,

but it's equally important that you pay off your credit cards in a timely manner.

As much as possible,

it's better to avoid going into any sort of debt or having to use your credit card in the first place,

but that simply isn't realistic for most Gen Zers and millennials.

So, I would encourage less spending on things you don't really need in the first place.

Put things in your online shopping cart,

but then let it sit over the next couple days, and then think if you really need it.

The less money you spend, whether it's yours or on credit, the better.

I, personally, have a shared credit card with my mom

because my parents do not trust me to have a good credit score,

but I need to build my own.

Yeah, yeah.