The Basics of Credit

Nancy Rodriguez

The Basics of Credit...

● What is credit? Credit is ability to obtain goods or services before payment, based on the trust that payment will be made in the future. The lender will look at your credit score to see if you are in fact trustworthy.

● What are the forms of credit? The four types of credit are secured, unsecured, revolving and instalment. You can get personal loans and credit cards.

● What costs are associated with credit? The discount fee charged by the credit card processing company and the up-front cost of purchasing the equipment. When you purchase an item with your credit card you get charged an interest. The interest goes up every month. You can see this when you get your credit report.

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

The credit bureau determines your credit score, they collect the credit ratings of individuals and makes them available to credit card companies, financial institutions, etc. Your credit score is determined by your creditworthiness. If the company sees that you do keep up with your payments your credit score will be higher.

Vocabulary Watch

Credit limit-Credit limit also refers to the maximum amount a credit card company will allow someone to borrow on a single card.

Credit history-Credit history or credit report is, in many countries, a record of an individual's or company's past borrowing and repaying

Debit vs. credit cards-A card issued by a bank allowing the holder to transfer money electronically to another bank account when making a purchase.:A plastic card issued by a bank, business, etc., for the purchase of goods or services on credit.

Credit Cards: What You Need to Know

● What is a credit card?A credit cards is a payment card issued to users as a system of payment . It allows the cardholder to pay for goods and services based on the holder's promise to pay for them. You sometimes might get a credit limit. This limits how much money you can use. If you go over that credit limit there is something called over-the-limit-fee. You can also get a penalty fee. Penalty fees are charged if you violate the terms of your cardholder agreement or other requirements related to your account.

● Where can you use credit cards? You can use your credit cards at any store you go to. You can also use the credit cards to purchase things online.

● What are the benefits and costs of using credit cards? credit cards provide the opportunity to delay payment for purchases, the convenience and safety of not carrying cash, and a source of emergency funds. The costs if using a credit card is that you sometimes get an annual fee. The annual fee is the charge you get for having the credit card. This is separate from the interest rate because the interest rate is the percentage charge you get from the bank for letting you borrow money

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

  • Keep track of what you pay and how much you pay so you don't go over the limit.

  • Only use the money you know you have available.

  • Make payments on time.

  • Look for a bank that has low interest rate and or no annual fee.