I use Paint.NET which is a lot like GIMP. They're not as powerful as Photoshop but they are free
and once you get to understand what they can and can't do it's perfect for creating thumbnails.
Cool.text.com for the text for the thumbnails, picmonkey or funky effects to make the background of it. Or you could always use paint.net I use it for everything graphic including my avatar here.
Yes. This is absolutely the way to go. It's several years older than the latest and greatest version, but everything you need to make a great image, regardless of being a thumbnail, is in this. It's superb of Adobe to release this for free.
GIMP is quite powerful as well, though I'm less familiar with it and not sure how it compares to CS2.
If you really want to see what the newest and best version of Photoshop can offer, you can get a free trial for a month.
I use Paint.Net, really easy, accessible, has a huge amount of plugins and is easier to use than Photoshop. If you're experienced enough, you can really make some good quality things.
I use GIMP, it's free and pretty simple to use. It was a little confusing at first, but once I started playing with it I really began understanding how it works
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