Importance of credit card, credit loan, APR, credit report

Basics of Credit

Credit - The ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.

Different forms of credit.

  • Credit Card
  • Credit Score
  • Credit Report


Requires interest and the promise to pay back the money used.

Not everyone is able to get credit cards. Determined by the following:

  • Character - Creditworthiness. Sees whether you are trustworthy. Could you be trusted with money?
  • Capacity - Do you have enough income? Will you pay back the money you owe?
  • Capital - How much debt to you owe? Have you payed it all and on time?

Vocabulary Watch!

  • Credit Score - Number assigned to you looking at your history, the bills you have paid, the debt you owe, determines whether you get a loan or not.
  • Credit Bureau - A private firm that maintains consumer credit data files and provides credit information to authorized users for a fee.
  • Credit Report - Should be checked once a year. Analysis of a person's credit standing during the collections process.
  • Interest (APR) - Annual Percentage Rate on loans or credit. Varies over time and if late than interest raised.
  • Lender - An organization or person that lends money
  • Personal Loans - A loan that establishes consumer credit that is granted for personal use; usually unsecured and based on the borrower's integrity and ability to pay

Credit Cards: What you need to know.

Credit Card

  • A small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services later.
  • Could be used to purchase goods and services from merchandise.
  • Benefits - Builds credit history so loan could be offered. Money used is protected.
  • Costs - APR, an interest, needs to be paid. The rates varies. Some banks have Annual Fees to be paid for the benefit to use the card. There is a credit limit of how much could be spent. Penalty fees issued if balance not paid on time. Over-the-limit fee is charged when you exceed your credit limit through purchases, fees, or finance charges.

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

Tips for safe use of credit cards.

  • Sign card
  • Never share password
  • Always use a secured browser
  • Do no do bank stuff in wireless cafe
  • Pay more than minimum balance
  • Only use it for necessity
  • Keep track of what you charge
  • Always pay on time
  • Check credit score every year