Credit

The Basics of Credit

Credit is the ability to borrow money in return for a promise of future payment. There are two different types of credit and they are personal loans and credit cards. Lenders look at how someone establishes creditworthiness in order to decide if they should give you the loan. Credit is not free, you have to pay interest or annual percentage rate (APR) and it usually ranges from 0%-29% Your credit score is kept in your credit bureau or credit report.

Vocabulary Watch

Credit bureau- includes your credit score and has a record of every adult
Penalty Fees-additional fee due to late payment, over credit limit, returned payment, etc.and could increase you interest.

APR- annual percentage rate or interest you have to pay for credit

Basics of Credit Cards

A credit card is la plastic card issued by a bank or business for the purchase of goods or services on credit. Some examples of credit cards are Visa, MasterCard, Discover, AMEX. Depending on the credit card, you have to pay an annual fee of $15-$100 plus an interest rate or annual percentage rate (APR). Every card has their over-the-limit fee where you go over the credit card limit. If you fail to pay back on time, you will be charged with a penalty fee which is an additional fee due to late payment, over credit limit, returned payment, etc.and could increase you interest.

Don't Fall Into The Trap

Here are some tips on being a smart consumer and how not to fall into credit card debt.

1. Pay your credit card bills on time, if you don't you will have to pay a late fee,

2. If you can't control your spendings, make a budget for yourself before it gets out of control.

3.The main 3 things you should be using your credit card for is your house, car, and schooling.

4. If you know you're over the limit, don't spend anymore money. They'll charge you extra.