Credit Newsletter

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SECTION 1: The Basics of Credit

Credit can be defined as the ability to obtain goods or services without paying at the moment, but assuring payment in the future. Credit can be used by acquiring a credit card, which is just a plastic card that is used for payment and is issued by banks or businesses. Personal loans are another form of credit, in which a loan is received from a lender, such as a bank, simply for personal use. However, there are separate costs that come with using credit. Those separate costs are called interest. Interest is the annual percentage rate (APR) that is charged for borrowing money or paying on credit. Not everyone is entitled to credit though. The credit bureau, which is a company that collects the credit ratings of individuals, can determine the creditworthiness of an individual. The creditworthiness, same as a credit report, of an individual can be determined by their credit history that basically shows how trustworthy they are with money. By knowing the creditworthiness of a person, a credit score can be given to them, estimating the ability to fulfill financial commitments. If used correctly and paid on time, buying on credit can be really useful when buying expensive goods.

SECTION 2: Vocabulary Watch

Important Vocabulary:

  • Payee- The person to whom money is paid, or will be paid to if buying on credit.
  • Collateral- something pledged to assure payment of a loan
  • Wire Transfer- an order transmitted by phone or electronically from one bank to another to pay or credit money
  • Credit History- a record of an individual's or a company's borrowing and repaying behaviors; for example: number and type of credit accounts, how long an account has been open, etc.

SECTION 3: Credit Cards: What You Need To Know

Credit cards are plastic cards issued by banks. They are used to buy goods or services on credit, instead of having to pay cash. As of today, they can pretty much be used anywhere. Though they are very useful, credit cards have their pros and cons. For example, if you ever have an emergency where a lot of money is required, you can use your credit card to help you out. Also, being responsible with your credit card will bring you a good credit score, increasing your trustworthiness with loans and stuff of that matter. On the other hand, if you are not responsible with your credit card, you will get yourself in a huge debt. If you go over your credit limit, which is the maximum amount of credit you have available to use, you will be charged with an over-the-limit-fee, and possibly penalty fees as well, or just extra money for your misuse. You can also be in debt because of the interest (APR) that is charged for buying on credit. If you allow interest to accumulate, over time it will become a big amount. Also, if you don't use your credit card enough, you should not get one because you still have to pay annual fees, which are payments for having a credit card.
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Section 4: Smart Consumers: Don't Fall Into The Credit Card Trap

Staying safe with your credit card can be done by doing simple tasks. For example, do not leave your credit card laying around anywhere, always keep it in a safe place. The last thing you want is for someone to be buying stuff with your money. The most important thing that you need to do, is to be responsible with your card. Do NOT over spend, or buy unnecessary items. Always keep track of your expenses and your credit limit.