 In today's divisive political climate, we're all asking the question, what unites us? Is there a quality we share? The answer is yes. Whether you are black or white, gay or straight, Republican or Democrat, college professor or high school dropout, man, woman or non-binary, we all have an equal right to get into credit card debt. Oh. Hello and welcome to the Communist Manifesto for Personal Finance, the only program that teaches you how to seize your means of production. I'm Comrade Rourke. Credit cards. The only thing more American than Apple Pie. But what are they? Because you're not an idiot. You know a credit card isn't a magical piece of plastic that lets you buy whatever you want. As communists, we believe credit cards are capitalism's tools to oppress the masses. But to be fair, we say the same thing about toasters. A credit card is a loan. A creditor, like a bank, lends you money so you can make purchases. Do creditors give these loans out of the kindness of their hearts? No. Now before we go any further, we want to address something we came across while researching this episode. A lot of credit card experts use math to explain how credit works, or graphs, or calculations, or mathematical calculation graphs. You know, things that are boring. As communists, the last thing we want to do is bore you. Especially you, Clyde Jenkins in Deerfield, Iowa. Now am I promising we won't use math to explain how credit works? No. But we will explain the math using a technique that never fails. A puppet show. Bolshevik Bunny's new vest. Hello, Bolshevik Bunny. Hi, capitalist pig. What's wrong? You're luck depressed. Oh, I want a new vest, but it costs a dollar, and I don't have a dollar. You don't? No. Well, Bolshevik Bunny, if you want to buy a new vest, I can lend you the dollar. You can? Gee, thanks, capitalist pig. No problem, Bolshevik Bunny. Just pay me back next week, okay? Okay. One week later. Hi, Bolshevik Bunny. Hi, capitalist pig. You seem chipper this morning. I guess buying something really lifted your spirits. It sure did. Who knew buying things created happiness? That's wonderful. Say, do you have that dollar I lent you? Actually, I meant to talk to you about that, capitalist pig. I can't pay the whole dollar right now. You can't? No. What can you pay me? Well, with my potato farming, at most I can pay you a penny a day. Well, hey Bolshevik Bunny, you can just pay off your dollar in installments. I'll take a penny a day. You will? Gee, capitalist pig, you sure are a good friend. Of course, I'm going to have to charge you interest. Interest? What's that? Well, you see, I have to make some profit for loaning you the money. Think of it as a fee for the dollar I lent you. Okay, I guess that seems fair. How much would I owe you? Let's say the interest rate is about 11,000% APR. That sounds fair to me, but I don't know what APR is. APR stands for annual percentage rate. When you take out a loan, the APR is how much interest you would pay over a whole year. So if you borrowed $100 with 12% APR over the year, you'd pay $12 in interest. Every credit card has APR, but here's the fun part. Credit cards divide their APR by days in the year. Since Bolshevik Bunny has a loan with an 11,000% APR, his daily interest rate comes to 30% daily compound interest. Wait, stop. Rewind and play that again. 30% daily compound interest. 30% daily compound interest. Compound interest. Compound interest. Destroyer of worlds. If religion weren't the opioid of the masses, I would call compound interest the Shiva and Brahma, a personal finance. Shiva because it destroys the savings of many and Brahma because it creates wealth for the few. So what is compound interest? Well, there's no good way to explain it without using math. math. And I know for a lot of you, public education beat out any love of that subject. Here's the basic gist. If you have a loan with compound interest, you're going to be paying a lot more than if you have a loan with simple interest. First, let's look at simple interest. Let's say you borrow $100 with a simple monthly interest rate of 5%. Every month, $5 gets added to your balance. The first month, you owe $105. The next month, $110. After a year, you owe $160. With simple interest, the 5% is always applied to the principal or the original $100 you borrowed. Simple, right? Now, let's look at compound interest. Let's say you borrow $100, but this time with 5% compound interest. So going back to our example, after the first month, you owe $105, just like with simple interest. But here's the kicker. The 5% now isn't just applied to the $100 you borrowed, it's applied to the $105 you now owe. So in the second month, instead of owing $110, you owe $110.25. After a year, instead of owing $160, you owe $179.59. Depending on how high your interest rate is and how big your balance is, credit card debt can compound rather quickly. Let's see how Bolshevik Bunny is doing with his loan. Here's your penny, capitalist pig. Thanks, Bolshevik Bunny. Now you only owe me $1.29. One day later. Here's your penny, capitalist pig. Thanks, Bolshevik Bunny. Now you only owe me $1.67. One week later. Here's your penny, capitalist pig. Thanks, Bolshevik Bunny. Now you only owe me $10.42. 28 days later. Here's your penny, capitalist pig. Thanks, Bolshevik Bunny. Now you only owe me $16,057.96. Gee, capitalist pig, I feel this 11,000% APR is a little steep. You do? Yeah, I think it's making me depressed again. Well, maybe you should have thought of that before you became such a fat, lazy piece of ****ing ****. Well, that was depressing. I feel this scenario has stressed me out. Let's move somewhere more relaxing. This is much better. Some of you might be asking, what was the point of depressing me with puppet animals? Well, it wasn't to torture you. 98% of the time, we don't use puppets to torture you. We want you to understand just how dangerous credit cards can be. If you're not careful, they can get you into serious trouble. But you can avoid that trouble if you follow the first law of credit. Always pay your full monthly balance. If you retain nothing else from this episode, please, please, please remember to always pay your full monthly balance. When credit card company sends you your monthly statement, the clock starts ticking on the grace period where you can pay your full monthly balance without acquiring any interest. If you always pay your full monthly balance, then you won't have to worry about APR or compound interest. You will control your credit card, not the other way around. So please, always remember the first law. Always pay your full monthly balance. And in an ideal world, you will always follow this practice and life will be sunshine and unicorn farts, and you'll never have to worry about mean old credit card debt. But as we all know, we don't live in an ideal world. Sometimes theory doesn't pan out in practice. Sometimes agricultural plans, they lead to mass starvation. Sometimes we make deals to split Poland with fascists, and two years later, the fascists sneak attack us. But come on, who makes deals with fascists? Life rarely goes according to plan. And sometimes you might not be able to pay your full monthly balance. There might be several months where this is literally impossible. If that's the case, you need to follow the second law of credit. If you can't pay your full balance, stop using your credit card. Imagine this splendid communist vessel is your financial future. Look at it, gracefully floating at sea. But uh-oh, there's an emergency. Now, you don't have enough money to pay the full monthly balance. Now, our vessel is taking on water. Yes, I know. It's preposterous to suggest communist engineering is capable of failure, but humor me. When you find yourself owing credit card debt, you're on a sinking ship. And if you're on a sinking ship, the last thing you want to do is poke more holes into the bottom of the boat. But that's exactly what you're doing when you keep using your credit card. And no, making only the minimum payment is not a viable strategy. To further beat this metaphor to death, making only the minimum payment is like trying to bail out a dreadnought with an espresso cup. So comrades, if you don't want to be drowned in your credit card debt, always follow the two laws. Always pay your full monthly balance. And if you can't pay your full balance, stop using your credit card. After explaining how the capitalist pigs use credit cards to gouge as much money out of you as possible, a lot of you are thinking, boy, credit cards sure seem dangerous for my financial future. I don't think I'll get one. If you feel like someone who will have a hard time controlling your spending habits, having a piece of plastic that lets you buy whatever you want is probably not the best choice. I'd almost say never having a credit card is a valid choice. I mean, it's not like the capitalist pigs created an oppressive system that coerces the working class into using credit cards right the credit score. Trans Union. When the Constitution of the United States was being written, the founding fathers took great pride that at least in theory, America would never become a theocracy. No longer would we live in fear of an arbitrary system of rules that decided whether we were going to heaven or hell. No longer would an elite society of priests wield extraordinary power over us. No. Finally, we would be free. That's what the founders wanted. But like so many things the founders wanted, it didn't turn out that way because we do live under a theocracy. And no, I'm not talking about Christianity or if you're a fascist, a.k.a. a stupid bastard, the Jewish deep state. No, the American God is credit and the credit bureau's are its priests. There are over 300 million American citizens, 300 million people whose financial welfare is determined by three credit bureaus, Trans Union, Experian and Equifax. These three credit bureaus collect the financial data and tabulate the worth of every single citizen of the United States. And I mean, as a communist, I love enormous bloated overreaching bureaucracies controlling every aspect of individual existence. But damn capitalism, way to out communists the communists. Now, why does this trinity of credit bureaus, one of which has already been easily hacked, collect all your personal finance data to generate your credit score? What is a credit score? Is it really just an arbitrary number used to signify your worth as a human being? Yes. Credit scores are what creditors use to decide if they should lend you money. It shows how likely you are to pay back the loan and any interest you accumulate. The credit score works on the scale of $3.50 to $8.50. To avoid wasting your time going over each individual section of the scale, I'm just going to tell you that if your score is above $6.50, you have a good to excellent credit score. If it's below $6.50, it's mediocre to bad. Now, if you're concerned about your credit score and want to find out what it is, let me stop you right now. Because you've probably seen a lot of commercials for some website that can show you your credit score for free and help you raise your score. 98% of the time, this is a scam. Your real credit score is called the FICO score. And the safest and surest way to get it is to go to myfico.com and pay $20 for it. Yes, I know what you're thinking. It seems really unfair and skeezy that we have to pay $20 to find out what our credit score is, especially since our credit score is so important for our financial future. Well, you know what they say, if it walks like a duck and talks like a duck, it's fucking capitalist oppression. Now, if you're someone who doesn't want to pay $20 to find out your FICO score, AKA a normal person, but still want to know how it's generated, I'm going to explain the three pieces of information the credit bureaus look at. Number one, payment history. Because you're not an idiot, you can probably guess that if you're late with loan repayments or stop paying them altogether, you get in trouble. Credit card companies aren't the Russian mafia, so they can't send someone to break your thumbs yet. But late or missed payments tank your credit score very quickly. So if you want to avoid this, try, try, try to make payments on time. Number two, amounts owed credit bureaus use a system called the credit utilization ratio. The credit utilization ratio is the amount of credit you use compared to your available credit. Let's say you have a card with a credit limit of $1,000, and you've spent $250 with this card using math, we can determine that you've used 25% of your cards available credit. This is your credit utilization ratio. Now, the credit bureaus like it when you have a credit utilization ratio below 30%, anything above 30% and your credit score starts to drop. Why? Because if you start maxing out your credit cards, it looks like you're headed for financial trouble and lending you money would be risky business. Number three, credit history and types of credit. The third factor that determines your credit score is the length of your credit history and the different types of credit you use. Wait, isn't that four factors? Silly Bolshevik bunny, you're mistaken. It's three factors, but it's four. No, it's three, four, three, three, three, four. It's three, because we say it's three. The longer you responsibly manage credit, the better you look to the credit bureaus, because think about it. If your best friend always pays you back whenever you give them a loan, you're more likely to lend them again. But if a random stranger named Dimitri emails you asking for money, you'll probably hesitate before going to your Venmo. Credit bureaus like it when you have a long history of responsibly using credit. And unlike the stupid bastards, aka the fascist credit bureaus like to see diversity. Well, at least diversity in different types of credit. They like to see you handle a variety of loans from car payments to credit cards, responsibly using your credit card raises your credit score. What doesn't help your credit score is not having a credit card, or having a credit card and never using it. To the credit bureaus, having a balance of zero on your card doesn't mean you're financially responsible. It just means you're afraid to use credit. And if it looks like you're afraid of a credit card with $1000 limit, why should a lender believe you can handle a 30 year mortgage? The point is, if you want to generate a good to excellent credit score, it's good to use a credit card. As long as you follow the two laws, always pay your full monthly balance. And if you can't pay your full balance, stop using your credit card. But here's the 850 point question. Should you worry about your credit score? Well, the answer is yes. And no, what kind of sensuous cuckoldry is this you ask? Well, first, let me tell you why you shouldn't worry about your credit score. If you always follow the two laws, always pay your full monthly balance. And if you can't pay your full balance, stop using your credit card. Your credit score will take care of itself. And you won't have to join a website, get a fraudulent app or pay $20 to look up your FICO score. Now, why should you worry about your credit score? Or at least consider it every once in a while. And yes, I know my socialist flock, the very idea that you would even learn what a credit score is, let alone improve it is so bougie you want to throw up in your mouth. I get it. And I'm not going to waste my breath trying to persuade you to care about something. All I'm going to say is that even though you don't care about your credit score, that doesn't mean other people don't people like car dealerships and banks that lend out mortgages. Now, if getting a good mortgage rate doesn't make you consider your credit score, think about this, prospective employers look at your score, potential landlords look at your credit score, all the major financial institutions you have to deal with in your adult life, judge you by your credit score. Yes, I know what you're thinking. Most of my financial happiness is determined by an arbitrary number controlled by giant corporations. That's not fair. No, it's not fair. It's capitalism. Unfortunately, your credit score is like gravity. You have to deal with it. There's not much else you can do except maybe get off your button vote. But hey, you have a right not to care about credit scores. You have a right not to care about anything. But just because you don't care about something doesn't mean it won't affect you. I'm comrad roark, and you are the revolution. Produced in collaboration with Fort Collins public media. If you have any questions, comments or death threats, please email us at communistfinance at gmail com or follow us on Twitter at comrad roark. Hello and welcome to the appendix. What's the best credit card to get? Well, like everything else in personal finance, it depends on your needs. If you're a high school or college graduate, the best card for you is one that has no annual fee and an APR less than 17%. You know a plain vanilla card and yes, I'm aware that using the word vanilla is a microaggression. But look, I'm just gonna say it. White people, you are basic. Now if you're financially responsible, have a good credit score and always follow the two laws, always pay your full monthly balance. And if you can't pay your full balance, stop using your credit card. You might look into getting a rewards card that gives you points or cash back for purchases. However, you should know that rewards cards have a higher APR than regular cards. So always follow the two laws. Now to find out if the card you want has a high APR or annual fees, you need to look for the card Schumer box. But seriously, when you're hunting for a new credit card, you need to look for the Schumer box because it contains all the information you need. Thanks to leftist darling, Senator Chuck Schumer, credit card companies are required by law to list the interest rate, fees and fine print on any promotional material. To find out more information about how to read the Schumer box, check out Beverly Hart Sog's Confessions of a Credit Junkie to learn what the fine print means. Finally, if you're looking for a credit card, be careful about doing any research on personal finance blogs. A lot of times personal finance bloggers are sponsored by credit card companies. They'll have an article saying this is our featured card and it's the best card ever. No 98% of the time the featured card is not the best card ever. The personal finance blogger is just getting a kickback for everybody who signs up for the featured card. So be careful when researching anything about personal finance. A lot of times personal finance bloggers are in the pockets of the capitalist pigs. Unlike us at the Communist Manifesto for Personal Finance, we're only sponsored by good, wholesome, Marxist Leninist communism. And as we all know, communism has never deceived anybody.