Credit, Specifically Credit Cards.

by: Tanya Dominguez

section 1 - basics of credit

What is credit?

Credit is the ability of someone to obtain goods before making a payment based on trust that a payment will be made in the future.

What are the forms of credit?

Loans, installment loans, and credit cards are all forms of credit.


What costs are associated with credit?

Credit cards have an annual fee that is usually between $15-$100. They also charge you for interest. Interest rates go from 0%-29%. If you pay the entire balance on time, no interest will be charged. You may consider getting a personal loan instead of using a credit card, because the interest rate may be lower.

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

In order to get credit, you must demonstrate credit worthiness. Credit Worthiness is the ability to pay back a loan. Lenders judge this using the 3 C's: Example character, capacity, and capital. The credit bureau has a record of everyone over 18 and each person is given a credit report which includes credit information like your credit score.


section 2 - vocabulary watch

Lenders judge you one the 3 C's of credit. The three C's stand for capital, capacity, and character. Capital is the value of what you own. Capacity is your ability to pay back the loan. Character is a sense of financial stability.

section 3 - credit cards: what you need to know

What is a credit card?

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

Where can you use a credit card?

You can use a credit card anywhere to purchase goods or services.

What are the benefits of and costs of using a credit card?

credit cards have an annual fee that is usually between $15-$100. They also charge you for interest. Interest rates go from 0%-29%. If you pay the entire balance on time, no interest will be charged. Your card may have a credit limit, so do not go over because you will be charged an over the limit fee. Penalty fees are also charged for if you make a late payment, go over credit limit, and could result in an increased interest rate.

section 4 - smart consumers: don't fall into the credit card trap

- Avoid too many credit cards

- Pay cash

- Don't miss payments

- Read what you sign

- Don't go over the limit

- Don't make late payments