Buy Now... Pay Later!

Francesca Lingat

The Basics of Credit

Credit the ability to borrow money in return for a promise of future payment. You get this money from lenders. Lenders are an organization or person that lends money, but with your promise to pay back. Credit gives people an opportunity to buy purchases now and pay it back later. This eliminates the option for people to save money for things and buying them later.

The forms of credit is house loans, car loans, credit cards, personal loans, and school loans. These forms of credit comes with a cost. The costs that associated with credit is that you must pay interest (APR). Another cost with credit is that if you use credit irresponsibly you can end up in heavy debt. Debt is when you owe money to an organization or person. If you don’t pay off the loans in time, then you may have to pay a late fee and this could lead to more debt.

To get credit, you must demonstrate your creditworthiness. This means your reliability to pay back a loan. A credit rating(score) reflects your creditworthiness. You get this information from loan applications. This application contains capitals, incomes, and debts. Another way to get information is the Credit Bureau. The credit bureau collects information on consumers’ credit and sells it. They also provide a credit report. Many lenders will ask for this to determine if you are eligible to apply for credit.

Vocabulary Watch

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Annual Percentage Rate (APR)

Annual percentage rate (APR) is a charge for borrowing, expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan. This also includes any fees or any other costs with a transaction.
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Credit Report

Credit report is a report of an individual’s credit history prepared by a credit bureau and used by a lender to in determining a loan applicant’s creditworthiness.
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Credit Score

Credit score is a numeric expression of a person’s creditworthiness that is used by lenders to access the likelihood that person will repay his or her debts.

Credit Cards: What You Need to Know

A credit card is a small plastic card issued by a bank or business which allows you to purchase goods now and pay for it later. You can use credit cards for anything that allows it. You can use it at the grocery store or even the mall. Remember when you use a credit card you are promising to pay for the money back.

The benefits of using credit cards is that if you establish credit now you will use it easily in the future. Another benefit is that it gives you the option to buy things now instead of saving up and buying it later. Although there are some benefits, credit cards also come with costs. You are required to pay an annual fee. This annual fee can be from $5- $100. You would also have to pay an interest rate (APR). You don’t have to pay interest if you pay the entire balance by the due dates. Many credit cards have a credit limit. Credit limit is the max amount you can spend using that card. If you go over that limit you would have to pay the over-the-limit fee. If you pay late or go over the limit then you would also have to pay the penalty fee. Penalty fees could lead to an increase in interest rate because of late payments or over credit limits.

Smart Consumers: Don't Fall Into the Credit Card Trap

To stay safe while using a credit card is to carry the credit cards you need. Do not apply for a lot of credit cards because this could affect your credit score. Be smart when you shop. Only buy things you really need with your credit card and not just things you want. You could be in habit with getting things you desire right now. When purchasing items make sure you know that you can afford it and will pay it back by the due dates. If you don’t there are penalties and this could lead to paying a person or organization more money than you already need to. Being responsible with credit cards can help you plan the money you borrow. This will also help you from going into debt. Credit cards can be a wonderful opportunity for many people to buy purchases, but be educated about the use and consequences that come with credit cards.