Be a Smart Credit User!

The in's and out's of what credit is and how to use it!

Here are the Basics!

Credit allows a consumer to borrow money to make a purchase and promising to return that money in the future. This allows consumers to buy big-ticket items without having to pay for it all at once. By using credit, a consumer promises to pay the lender back the full amount plus the addition interest or annual percentage fee (APR). Credit usually comes in one of two ways: credit cards or personal loans. There are many different banks that offer credit cards; each of them having their own fees, ARPs, and grace periods. Similarly, there are many types of personal loans, such as loans for a car or house. But not everyone can get the same type or amount of credit. The Credit Bureau determines every adult’s creditworthiness by judging their capital, capacity, and character and then assigning them a credit score. A credit score can improve with on time payments, low debt, and a limited amount of credit cards. This credit score is better as it gets higher and will allow the consumer to get more loans from their lender. The lenders also request a credit report from the Credit Bureau that shows their consumer’s credit history and credit score.

In's and Out's of Credit Cards

A credit card is a way to purchase items without using money you currently have. Instead, you can make purchases and then pay back the credit card company for the amount you used. Depending on the type of credit card, you can either pay back the total amount you used or just pay back small percentages of the total amount. Credit cards are typically accepted everywhere. There may be small stores or restaurants that don’t accept them, but most major companies will take credit cards. Credit cards allow consumers to buy items that they don’t have enough money for at that moment. In addition to this, some companies give their customers the added benefit of rewards and discounts such as cash back on their purchases. However, there are also many costs when it comes to using credit cards. In addition to paying back all of the money you’ve borrowed, consumers also have to pay an interest rate, or annual percentage rate, on that total amount each year. Companies can also require many fees to be paid in certain situations. Some, but not many, may require an annual fee for using their credit card. A typical fee that one may encounter is a penalty fee that is charged when a payment is paid late. Another fee companies may have you pay is a over-the-limit fee that occurs when you go over your credit limit, or the maximum amount you’re allowed to spend.

Tips and Tricks when Using Credit Cards

Credit cards can become very distressing very fast, so be careful! When first looking to apply for a credit card, make sure that you understand all of the responsibilities that come with it. Since you’re not physically seeing the money vanishing from your wallet or bank account, it’s easy to lose track of how much your spending. Keeping all of your receipts or making a list can help you keep a handle on how much your spending. If you don’t keep track, you could easily fall into a large amount of debt, which could lower your credit score and then worsen your debt. When paying for credit cards or loans, make the biggest payment you can in order to pay off your loans as quickly as possible. This will reduce your chance of debt and the amount of interest you have to pay!

That Means What??