Using Credit Wisely

Tips on How Credit Works and How To Manage It

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Credit Card vs. Debit Card

Credit Card - card used for payment that is linked to a bank or financial institution;

a card is used through a credit line (i.e. loan) that is interest-free if monthly bill is paid on time


Debit Card - card used for payment that is linked to your personal checking account;

money is taken out as the transaction occurs

Advantages and Disadvantages of Credit

Advantages of Using Credit:

  • Useful for Emergencies
  • Often required to hold a reservation
  • Convenient
Disadvantages:

  • Tempting to Overspend
  • Risk of identity theft
  • Paying interest if balance is kept on card

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Annual Percentage Rate ( APR)

Annual Percentage Rate - interest rate on a credit card; also an estimate for of the percentage you pay on your principal over the course of the year


Why Is This Important?


  • APR is not equal to the exact percentage you end up paying because that exact percentage is affected by the frequency with interest is compounded

Here is an example:

Total Purchase Amount: $500

Credit Card APR: 18%

Planned Monthly Payment: $50

The amount of time that it takes you to pay off this purchase is 11 months. The final month's payment is $45.78. $45.75 is also the total finance charge. In total, you spent $545.78.

How to Develop A Positive Credit History

  • Check monthly credit card statement for errors
  • Pay amount charged in full
  • Keep track of charges by keeping receipts
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Want To Get a Free Credit Report?

If you want to request a free credit report, there are plenty of places to look. Experian, Equifax, and Transunion are popular reporting agencies. You do have a small fee with these agencies. There is also annualcreditreport.com that provide a credit report for you. You can also request your credit report by phone and mail. This is very important to check credit report errors on your report.

Financial Apps/Websites

If you want to keep your debt and finances in line, check out this apps and websites:

Betterment

Mint

Simple

Learnvest

Wealthfront

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What If You Experiencing Financial Difficulties?

If you are experiencing financial difficulties, it is important to make sure if you need help, it is ok to get help. People sometimes resolve their problems by self-control or discipline, but other use financial counseling services. If you decided to pursue help from a financial counselor, then they will create a debt management plan that works best for you. If you would like a list of local non-profit credit counseling centers aligned with the National Foundation for Consumer Credit, call 1-800-388-2227.