Be a Smart Credit User!
The in's and out's of what credit is and how to use it!
Here are the Basics!
In's and Out's of Credit Cards
A credit card is a way to purchase items without using money you currently have. Instead, you can make purchases and then pay back the credit card company for the amount you used. Depending on the type of credit card, you can either pay back the total amount you used or just pay back small percentages of the total amount. Credit cards are typically accepted everywhere. There may be small stores or restaurants that don’t accept them, but most major companies will take credit cards. Credit cards allow consumers to buy items that they don’t have enough money for at that moment. In addition to this, some companies give their customers the added benefit of rewards and discounts such as cash back on their purchases. However, there are also many costs when it comes to using credit cards. In addition to paying back all of the money you’ve borrowed, consumers also have to pay an interest rate, or annual percentage rate, on that total amount each year. Companies can also require many fees to be paid in certain situations. Some, but not many, may require an annual fee for using their credit card. A typical fee that one may encounter is a penalty fee that is charged when a payment is paid late. Another fee companies may have you pay is a over-the-limit fee that occurs when you go over your credit limit, or the maximum amount you’re allowed to spend.
Tips and Tricks when Using Credit Cards
That Means What??
Credit Score
A credit score is a rating between 300 and 850 that is assigned to every adult by the Credit Bureau. The higher the number, the better your credit is. Lenders use this number as an indication of how capable a consumer is to pay back their loans. Scores can be influenced by payments being on time, low amounts of debt, and a limited number of credit cards.
Annual Percentage Rate (APR)
An annual percentage fee is the interest rate a consumer must pay in addition to the loan payments. This rate reflects the amounts and costs of the loans taken out during one year.
3 C's of Credit
The 3 C’s of credit are capital, capacity, and character. Capital is the overall value of what you own and the amount of savings, investments, and property you own. Capacity is your financial ability to repay a low and making sure you have a high enough income. Character is showing that you have financial responsibility and dependability. Lenders use these three C’s to determine creditworthiness.