Reba Hall

The Basics of Credit

Credit is the ability to obtain goods or services before payment, based on the trust that payment will be made in the future. Someone who gives you a credit card is called a lender. Creditworthiness is the trust part of the credit, and if you should receive it. There is three types of credit. Installment credit, revolving credit, and open credit. There are fees that come with credit cards and some have upfront costs. People depend on their bank accounts and they also check if you pay off your bills, if you paid credit cards off, and personal loans. Your credit score is based on your payments and if you paid your bills or loans off in time. All these things play a factor into getting credit and how much someone gets. When you get a credit card you have interest. Interest is the percent rate you based on your credit score. This is you paying interest on your purchase, so interest is the extra money you pay that is not part of the initial purchase. At the end of each month you get a credit report. A credit report is what tells you how much you spent, owe, and the interest. Your credit score is the score the government gives you based on how often you pay bills on time and how much money you owe. In order to get a low interest rate on something you want to have a higher credit score, which means it is better. For example, when buying a car you want a higher better credit score so you can get a lower interest rate on your purchase.

Vocabulary Watch

You can do an electronic transfer of money. This allows you to transfer money from one account to another over the computer. Without going to the bank to transfer money this makes it more convenient for consumers. At the bank they use a safe deposit box. This is a metal strongbox that is used for storing valuable or money. This is normally located at the bank. Overdraft is something you do not want to do. If you overdraw on your account you will be charged fees. This is using money you do not have.

Credit Cards

A credit card is a card you can use to purchase something when you do not have the money in hand at the time. You can used credit cards anywhere to buy anything you want. You have an interest rate on each credit card you have, the lower the better. At the end of the year you have an annual fee you have to pay for using that credit card. The benefit of a credit card is that you can pay for something when you do not really have the money and pay it back later. You have a credit limit which is how much money you can spend on that credit card. If you go over the credit limit you will pay an over the limit fee on the money you spent. If you are late on a payment of your credit card you will be charged a penalty fee.

Smart Consumer: Don't fall into Credit Card Trap

In order to be a smart consumer and not fall into a credit card trap you can do many things. For one do not over spend on things you do not need. This will lead to excessive credit card bills that need to be paid off. Also, in order not to fall into dept with credit card payments you should pay off your bill each month. You should probably only open one or two credit cards so that you do not spend more and it is easier to keep track of your spending.