Credit, Is It Right For You?

what you need to know about the credit card

By: Gabriela Gryc

The Basics Of Credit

What exactly is credit? Well it is the ability to borrow money in return for a promise of future payment. Credit comes in two forms: personal loans and credit card. If you have good credit, the bank, as the lender will lend you a certain amount of money. Credit cards are more popular though. Sounds great right? Buy now pay later? There's a catch... credit cost YOU interest (APR or annual percent rate)! To get credit, you must demonstrate your creditworthiness, through character, capacity, and capital. Easy to remember right? Character is your sense of financial responsibility; Capacity is your financial responsibility to repay your loan; Capital is the value of what you own. All of this information comes from the Credit Bureau, which is in charge of collecting information about consumers credit and assigns them credit score. The higher the score you have, the better! You can find your credit score inside the credit report, which contains it and your credit information. A lot to take in, but this is the simplest it gets!

Vocabulary Watch

Credit Cards: What You Need To Know

Credit cards are small plastic cards issued by banks, businesses, etc., allowing the holder to purchase goods or services on credit. You can use them at almost any store, especially retailers, supermarkets, etc. You mostly cannot use them in small businesses that only accept cash. The benefits of using credit cards are that they allow consumers to purchase more goods. More goods means more people to make goods, which means more jobs. People with jobs are able to spend more money, which is then used to purchase even more goods. It is a circle of credit! The catch is you need to pay for using credit cards. Annual fees are required yearly sums of money you must pay, interest (APR), from 0%-29% to pay your entire balance by the due date, and credit limits, a max amount you can spend on the card. If you don't pay on time, you will be subjected to penalty fees, which is additional amount of money due to paying late. Over-the-limit fees, due to going over the credit limit. Other than that, just keep your payments on time and watch what you spend!!

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

Here are some helpful tips when using credit:

  • Consider a loan as opposed to using a credit card
  • Interest rate may be lower
  • Pay credit card balance in full
  • Avoid minimum payment trap
  • Choose card wisely
  • Least expensive; greatest benefits
  • Avoid too many cards
  • Pay cash
  • Don’t miss payments
  • Read what you sign
  • Avoid identity theft
  • Beware of bankruptcy!