Types of Credit

By: Steve Moreno

What Is Credit?

Credit gives the ability to buy stuff without having to pay for it up front, you have to pay later.

What Are The Forms of Credit?

Secured: With this kind of credit, the creditor guarantees that it will be paid back by putting a lien on an asset you own. Car loans, mortgages, and home equity loans are common types of secured credit.

Unsecured: When your credit is unsecured, you simply give your word to the creditor that you will repay what you borrow. Credit card, medical, and utilities bills are all examples of unsecured credit.

Revolving: If your credit is revolving, the creditor has approved you for a set amount and you can access the credit whenever you want and as often as you want. In return, you must pay the creditor at least a minimum amount on your account’s outstanding balance each month. Credit cards and home equity lines of credit are examples of revolving credit.

Installment: With installment credit, you borrow a certain amount of money for a set period of time and you repay the money by making a series of fixed or installment payments. Examples of installment credit include mortgages, car loans, and student loans

Costs/Benefits of Credit?

  1. Convenience--Credit cards can save you time and trouble--no searching for an ATM or keeping cash on-hand.
  2. Record keeping--Credit card statements can help you track your expenses. Some cards even provide year-end summaries that really help out at tax time
  3. Instant cash--Cash advances are quick and convenient, putting cash in your hand when you need it.
  4. Build positive credit--Controlled use of a credit card can help you establish credit for the first time or rebuild credit if you've had problems in the past--as long as you stay within your means and pay your bills on time.

What Is A Credit Score?

A credit score is generated using a specific formula and is based on whether a person pays bills on time, how much debt they owe, the length of their credit history, how many new accounts that person has, and the diversity of their credit accounts.

What Is A Credit Card?

A small plastic card issued by a bank, business, etc. allowing the holder to purchase goods or services on credit.

What are Credit Cards Used For?

Credit cards are used to make purchases in stores and online. Not all credit cards are accepted everywhere but most can be used to make purchases online.

What Are the Costs/Benefits Of Using A Credit Card?

Some of the benefits of using a credit card include: purchasing without cash, they're more safe than carrying cash, you can earn rewards points or cash back for using your credit card. Some of the costs of using a credit card include: paying multiple fees, accumulating a large debt, and being susceptible to identity theft.

Buying A Credit Card

Citi Thank You Card

  • Annual Rate: 0% for first 12 months
  • APR: 13.24%-24.24%
  • Fees:

    Late fee-$35

    Cash Advances- 5% fee

    Balance Transfer-3%

    Purchases on trips abroad-3% fee
  • Incentives:

    Earn points on every purchase and use those points to redeem rewards such as gift cards, travel tickets, concert tickets, etc.

Discover It Student Card

  • Annual Rate: $0 for first 12 months
  • APR: 13.24%-22.24%
  • Fees: $35 late fee Balance transfer 3% fee Cash Advance 5%-10% fee Returned Check $35 fee
  • Incentives:

    No foreign transaction fee

    0% interest APR

    Good grade rewards

    bonus cash back categories


Credit cards can be very useful and convenient to own, as long as you use them properly. Credit Cards should only be used if you are able to pay back the money you owe. The average American is $15,762 in credit card debt alone! That why it is important to do research of the types of credit and the different ways to effectively using credit so that you don't end thousands of dollars in debt.