Since babyboomer1001 covered insurance, I will tell you what I know about credit card.
- How to apply
Go to bank and tell them you want to apply for credit card or apply online. You'll give them information of your finance. They will check your income, ability to make payment and credit score. This will take some time like 2 to 4 weeks and usually free. All they will let you know is if you're approved or not and never tell you what your credit score is. If you want to know, you got to pay to companies that does that for you. Always apply 1 card at a time and only check credit when you absolutely need to such as for getting loan.
- Bank and credit company
Bank and credit company are different things, more like branches. Credit company works for the bank and you never really visit them physically. You typically talk to them on phone and by mail.
- Credit company
There are many credit companies but I think the most trust worthy ones are the ones that works for major banks.
- Credit score
Credit score is past 7 years history of your finance. Good credit would be 750+ and higher the better. To increase the score, make the payment on time(credit card, phone bill, electric bill...etc). If you miss, you'll lose some score. If you just turned 18 and have no employment history, you don't have credit score yet so what bank can do is to offer you a starter card usually with small limit such as up to $1000. Having high credit score will allow you to have higher limit of the card and how much you can get from loan. Credit score is usually referred as "credit".
There are 2 kinds of interest, purchase and cash advance. Purchase is usually lower rate than cash advance. Purchase is for using it when you buy something. Cash advance is withdrawing money from the bank. Cash advance is for an absolute emergency.
- Annual fee
It's a fee you pay once a year and it comes out from your card. If you've reached the limit of the credit, they will still charge you and this will cause a penalty.
There are many kinds of penalties but the main ones you want to be careful is about going over the limit and inactive card. Make sure to use the card continuously but that doesn't have to be every month, it could be every 2 months.
- Types of cards
Each cards offers different kind of benefit. Of course there's a card with none or very little benefit but the limit/interest/annual fee would be on the lower side. They usually gives points by you using a card and more you use the more points you get. 2 main types of reward would be cash back and points you can use to get gift cards or use it towards groceries, flight tickets, gas etc. Cash back is taking percentage of what you used and using that for the monthly payment.
- Types of cards 2
Visa, mastercard, american express(referred as amex usually)...etc. Some stores or restaurants or hotels don't accept amex so having visa or mastercard or both would be the most useful. Also there's an apple pay but I'm not familiar with this one.
They offer variety of insurances and some cards comes with it automatically. They can also offer more than that such as balance protection for theft and life insurance...etc.
- How many credit cards to have?
I'd say at least 1 but ideally 2 and maximum of 3. More cards you have the harder it is to manage. But if you make a butt ton of money, you can of course have more than that. For a starter, let's say you make $1200 a month. Don't get a card that has limit more than $1200, play it safe.
- Building credit score effectively
Make bill payment on time every month. Consistency is the key. Credit card, spend little every month, pay the minimum and some more on time. For example spend $10, your minimum payment is $2 so pay more than $2 such as $5. But it is the best if you can pay all of it on time. All other bills, pay what they ask on time or at least pay half of them every now & then. This way you can show that you're still interested & willing to make payment for the services you're receiving.
If you keep missing the payment for certain amount of the time, credit company will call you and ask you what's up. They will tell you to pay this much right now and we won't call debt collection agency. You want to make that payment right away if you can. If you can't, they may give you a last resort pity offer like okay if you pay this much monthly(higher than minimum payment), we won't call them but if you ever miss it, we'll call them. Calls from debt collection is a nightmare, I've experienced it and it gave me an ulcer. You want to avoid it with all your might. It's so stressful, it can push people to kill themselves for the worst case. This is the penalty you get for not making the payment responsibly. You must pay what you've borrowed. This will significantly affect your credit in bad way and it will take years to recover.
- Debt consolidation
If you still can't make payment with collection agencies calling you or you owe ridiculous amount like $60000, you may want to use debt consolidation service. They will call all of the agencies and make deals with them then they will sum up to 1 bill. This will be an automatic payment so you WILL make the payment monthly. They take bit from the bill then use the left over to pay agencies. This 1 bill will give you just enough left over for you to survive, so you won't die. Penalties for using this service is that you can't apply for another credit cards and you won't be able to borrow money such as loan. Thankfully I've never used this service so I don't know any more than what I've wrote here.
I might have missed something, I don't know. Please don't just take what I wrote here and move on. Research some more on your own and read & read & read. Correct information is power and more you know the better. I've made mistakes when I was young and foolish, but I've recovered from it by being responsible. It is the best if you don't have to go through what I went through.
Overall credit is super easy to use once you get a hold of it and people often can't win against using it. They quickly use it up to limit and have problems paying, which is very common. You want to avoid that temptation as much as you can.