The Basics of Credit
Jennifer Alvarado Consumer Ed 7/8
What is Credit?
Credit is borrowing money that allows you to buy now and promise to pay later. A banker acts as a lender, and the bank is where you borrow money from when you sign up for credit cards.
What are the forms of credit?
Personal loans and Credit Cards are different forms of credit.
There are three different types of credit Installment, Resolving, and Open.
What costs are associated with credit?If money is not paid back in time you are subject to pay interest (APR), an annual percentage rate of interest for the whole year, or fines. You can check your credit score by requesting a credit report. The Credit Bureau collects credit ratings and they are made available to financial institutions.
What determines if someone gets credit and how much they get?Your credit worthiness is determined by Character, capacity, and capital. Capacity is the financial ability to pay back a loan. Capital is the savings, investment, or value of what you owe. Character is your financial responsibility and dependability.
What is a credit card?
A credit card is a plastic card issued by the bank that allows you to purchase goods or services on credit.
Where can you use credit cards?
You can use credit cards in most locations for large or small purchases.
What are the benefits and costs of using credit cards?The benefits of using a credit card is the ability to buy now and pay later. You can pay off a credit card if you borrowed a large sum of money, like buying furniture for an apartment. When signing up for a credit card you may be subject to pay annual fees, which is a charge for the privilege of using a credit card. Banks provide a credit limit as to the maximum amount of money that can be borrowed. If you do not pay the money loaned on time you may be subject to greater interest rate at the end of the year, penalty fees for violating terms, or over-the-limit fees for exceeding the loan limit.
5 Tips for the Safety Use of Credit Cards
Never give anyone your pin.
Do not write down your credit card number or pin.
Do not give account number over the phone unless you initiated the call.
If you make a payment over the internet, make sure it is a secure webpage.
- When making a payment make sure your card is visible during the transaction