Basics of Credit
What is credit?
Credit is the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.
Types of credit
- Loans let you borrow money that must be repaid with interest.
- Installment loans are made for a fixed amount at the time of your application and approval.
- Credit cards are perhaps the most common type of personal credit. Unlike installment loans, credit cards allow repeated transactions up to a maximum credit limit, also known as your available credit limit.
Costs and Benefits
Credit cards can make it easier to buy things. Credit cards may also offer you additional protection if something you have bought is lost, damaged, or stolen. Some credit cards offer additional benefits, such as discounts from particular stores or companies, bonuses such as free airline miles or travel discounts, and special insurances
A person's credit score is extremely important, as it determines his or her eligibility for all kinds of financial endeavors, such as credit cards and home loans. Some people have difficulty adjusting their scores because they are not sure what the number is based on. A specific formula is used to determine the score, and it's based on whether the person pays bills on time, how much debt he or she has, the length of his or her credit history.
A small plastic card issued by a bank, business, etc., allowing the holder to purchase goods or services on credit.
Where can it be used?
You can use a credit card at any place that allows it. But you should be careful when spending.
- Record keeping
- Low-cost loans
- Instant cash
Using credit wisely
When using a credit card you should always spend wisely. You should also have a budget and stick to it. Keep your card balances low and make sure to always pay bills on time.