The importance of building credit
Arianni De la Rosa
What is credit?
Revolving credit. With revolving credit, you are given a maximum credit limit, and you can make charges up to that limit.
Charge cards. While they often look like revolving credit cards and are used in the same way, charge accounts differ in that you must pay the total balance every month
Service credit. Your agreements with service providers are all credit arrangements.
Installment credit. With installment credit, a creditor loans you a specific amount of money, and you agree to repay the money and interest in regular installments of a fixed amount over a set period of time.
Personal loan: establish consumer credit.
Loan: Make funds available.
Cost and benefits of the credit
Advantages
Credit is convenient. You do not need to carry a lot of money with you.
You may save money, because you can take advantage of sales.
Credit can help if you need money for emergencies, such as unemployment, illness, death, or property loss.
Credit is handy for making purchases through the mail, telephone, and Internet.
- Credit Bureau make the credit available.
- Credit Car: you can spend the money and pay to the company later.
Disadvantages
Credit usually costs more than paying cash. Interest and other charges may be added to the purchase price
Credit ties up future income. When you use credit, you owe money that must be paid back from future income.
You may buy more than you can afford.
Credit ties up future income. When you use credit, you owe money that must be paid back from future income.
- The APR
What is credit car?
A credit card allows you to borrow money from your bank to make your purchases. People cannot get over limit fee because when their balance go over credit the purchases will put them over limit, this is also knows as credit limit. The penalty fee are for the people that are unable to pay. We can use this card in any store and everywhere. There are some cos and pros of this car:
Pros
You can make a large purchase now and pay it off in smaller chunks
Your credit card statement makes budgeting easier
It’s easier than carrying around a wad of cash
You can build up your credit score, which will be useful later on.
Cos
You can easily dig yourself into debt if you’re not careful about your spending
The ease of using credit cards can cause you to overspend
- Interest rates can make even a small debt seem larger over time.
- The APR
Advantage and Disadvantage
MasterCard/Freedom
Annual rate: 1%/ 30%
APR: 24%/ 24%
Fees: 0%/ 30%
Advantages of MasterCard
Price protection
Purchase assurance
Satisfaction guarantee
Disadvantages
Bad credit
lost of licence
Advantages of Freedom
Safety and security
The government can provide more services
More protection with less freedom
Disadvantages
Loss of control
lees government provide less service
Freedom has to balance with the government