Uncovering Credit
By: Lizbeth Arellano
The Basics of Credit
Credit can be associated with some benefits that can be favorable to consumers if used with caution. Credit can help consumers make more purchases which can help stimulate our economy and make more jobs for people. Yet, there are some disadvantages of credit as it's not free. With credit also comes Interest(APR). The longer a person waits to make a payment, the more the interest is being accumulated towards the unpaid fee. If a person is not being responsible and paying their fees on time,they can easily end up in debt.
Credit has many different forms in our society. Credit Cards are one of the most popular types of credit because a consumer can easily get one and use it to pay personal loans such as bills, groceries, clothes, and items online. What you spend while using a credit card is reflected on bank statement each month. There are also student loans, car loans, and mortgages.
Before lenders give out loans, they check a consumer's credit history and asses their creditworthiness by judging the applicant's character, capital, and capacity in order to make sure the applicant can pay off the loan. The Credit Bureau collects information on a consumer's credit and can also be used by lender's to check credit history. A Credit report can be found in the Credit Bureau and contain's a consumer's credit score that reflect's a person's creditworthiness. In addition, a credit score is what determines if someone is eligible for credit and how much they can receive.
Credit Cards: What You Need to Know
Yet, credit cards also have Interest rates that differ depending on the company. A company also has the power to assign a credit limit to a consumer which can either have a positive or a negative impact. Another set back is that having a credit card is not free because consumers have to pay an annual fee for having a credit card. If a person doesn't make a payment on time, the credit card company can charge a person penalty fees for making a late payment. Another charge that can be added is the over-the-limit fee when someone exceeds their credit limit. Becoming in debt is very easy if recklessly using a credit card. On the other hand, if a consumer is being responsible, a credit card can be a good tool to use in order to boost their credit.
Shopping for credit: Comparing Credit Cards
The second credit card is the Discover It Secured Card. This credit card's advantages include 1% cashback on purchases, no annual fee, and free FISCO score on monthly statements. Some disadvantages include an APR of 23.99%, grace period of 23 days, cash advance rate of 25.99%, and a max late fee of $37 compared to the Capital One Quicksilver.
Smart Consumers: Don't Fall Into the Credit Card Trap
- Only borrow when they know they can pay it back
- pay all bills on time
- check credit score at least once a year
- look for best offers and interest rates
- make a budget and stick to it