by Tess Arciniega
The Basics of Credit
● What is credit?
-The ability to borrow $$ in return for a promise of future payment
-aka “Buy Now…Pay Later”
● What are the forms of credit?
1.Loans (School, House, Car)
● What costs are associated with credit?
-Credit Cards are not free!
-You must pay interest!
-Debbie borrowed $100 w/ an interest rate of 15% per year
-$100 x 0.15 = $15
-$100 + $15 = $115
-It will cost her $115 to borrow $100
-Sometimes there are annual fees!
● What determines if someone gets credit and how much they get?
-A credit report determines how much credit someone will get from a credit lender.
-If you have a bad credit history, you might not get credit!
-You must show you are reliable (have a job and can pay on time).
-In order to determine your creditworthiness, they will use the Three C's:
• Savings, investments,
• Value of what you own
• Use capital to pay loan if
• Financial ability to repay
• High enough income
• Major expenses & debt
• Sense of financial
• Steady job
• Residence (long term)
• Credit history
-With these, they can determine your credit score!
-Sometimes personal loans, or other credit history, can benefit or hurt your score!
-This info comes from the Credit Bureau, which collects info on consumers’ credit and
Credit Cards: What You Need to Know
● What is a credit card?
-A card in which you borrow money from a company/bank/corporation, and then you pay it off at the end of the month.
-They may have annual fees!
-There will be a credit limit, or a limit on how much money you have on the card. If you do not follow this limit, you will get a over-the-limit fee! :(
● Where can you use credit cards?
-You can use credit cards in most places.
● What are the benefits and costs of using credit cards?
-The benefit is that you can buy an item ahead of time, when you do not have the money, and pay for it later, when you do. The cost is that there will be an interest rate fee. If you do not pay back this money, there will be a penalty fee!
• Credit allows consumers
to purchase more goods
• More goods = more
people to make goods =
• People w/jobs are able to
spend more money
• Use credit to purchase
even more goods
• People overuse credit
• Fall into heavy debt
• Can no longer purchase
goods – must pay debt
• Decrease demand for
goods = decrease need
• No job = less spending
• Less spending = lower
demand for goods = job
Smart Consumers Don’t Fall Into the Credit Card Trap
-Don't just sign up if they will give you a free item, or 0% APR, because they can later charge you very high prices!
-Only buy items in which you know you can pay them back in a month!
-Always pay the full price on time! Otherwise, the money carries over, and you will also have to pay interest! It gets expensive!