Bart Stasik

The Basics of Credit

Credit is the ability to borrow money and then pay for it later. Credit mainly comes in two forms: credit cards and loans. Credit cards are plastic cards generally used for smaller everyday purchases at stores. Loans, or personal loans, are borrowed from lenders, like banks, when making a big purchase for like a car, house, or college. Costs associated with credit are lowering credit scores and increase in APR, annual % rate. In order to get credit, you must prove your creditworthiness, ability to pay back a loan. Lenders determine this using character, capacity, and capital. The credit bureau then sends a credit report showing your credit score.


Credit Cards

Credit Cards a a piece of plastic that can be registered from your bank and used for purchases. Instead of carrying large amounts of money to the store, people can use credit cards that work on credit to make purchases and then pay for them later. You can use credit cards almost anywhere. Benefits of credit cards would be that you can buy on credit and then pay for it later. Instead of making a big purchase all in cash, you can save that cash for an emergency and slowly make a minimum payment each month for that purchase. Many credit cards also offer 0% interest rate for first couple of months so it's like basically paying later for free. Some costs would be that credit cards have annual fee's for usage, and APR rates. There are also late fee's and for going over the credit limit.

Smart Consumers

The one thing I would do to be safe with credit cards would be to have a limited number of credit cards. The less is the better because then you won't be tempted to go over the limit and and abuse credit cards. Many people when they first get a credit card feel good when they can make all the purchases they want now and then pay for it later. It can go to up their heads and then make a bunch of unnecessary purchases. This is how many young consumers go into debt and are then faced with many late fees, over the limit fees, and end up in bad credit scores.