Everything To Know About Credit

How to be successful when it comes to credit

The Basics of Credit

● What is credit?

Credit is money that can be spent now, but must be paid back later plus a fee, called Interest. Interest (also called APR, or Annual Percentage Rate) is a percent of the principal, the initial amount, and comes as either simple or compound.

● What are the forms of credit?

The forms of credit are credit cards and personal loans. A credit card is most common and allows you to spend money your Credit Bureau, or credit agency, lets you borrow from. A personal loan is money a lender lets you borrow. As mentioned before, interest will usually come out of using credit.

● What costs are associated with credit?

The costs associated with credit include paying the principal, the original amount you borrowed, plus interest.

● What determines if someone gets credit and how much they get?

What determines is someone gets credit is their credit report. It reports their creditworthiness and credit score, both which basically indicate the likelihood of the borrower paying back the credit and its interest on time.

Vocabulary Watch

Credit Card- a card you get from a bank that lets you borrow money directly from the bank

Character- the judgement a credit card agency or bank creates for a person when they try to apply for a credit card

Credit history- a collection of your past debts and their balances

Credit Cards: What You Need to Know

● What is a credit card?

A credit card is a card that lets you borrow money from a bank or other lender. Usually, credit cards will have a credit limit, which limit how much money you can spend. They do this so you don’t spend too much money, resulting in you getting too much debt.

● Where can you use credit cards?

You can use a credit card almost anywhere, because it is the equivalent of spending cash, but it depends on in the establishment has a card reader that enables them to accept credit cards.

● What are the benefits and costs of using credit cards?

The benefits of using a credit card is that it lets you spend your money almost anywhere, assuming the store has a card scanner and accepts credit cards. The costs to using a credit card is that you must pay an interest rate, called an APR, yearly. If you don’t, you will face annual fees, which are an extra cost. In the event that you spend more than your lender allows, you will be faced with over-the-limit fees. Another cost is, if you don’t obey the credit card’s policy, you will be faced with penalty fees.

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

Some ways to be safe using your credit card is to not spend more than the limit stated, often found in the credit card’s policy. This way, you won’t be spending more money than you need to. Another thing you could do is pay your credit bills on time. Although you will face an extra expense because of interest, you wouldn’t want an even more expense because you’re paying bills late. Another, final, thing you could do is only use the credit card for emergencies, so you’re not impulsively spending money you don’t have. If you only spend money when you really need it, you’ll minimize impulse expenses as well as the chance of bringing your bills so high that it comes too difficult to pay them off.