Join the Credit Crowd!

Understand credit and learn how to benefit from it!

The Basics of Credit

We've all heard about credit history, credit cards, and financial loans. But what is it really? Well, credit is basically the ability to borrow finance in promise of future repayment. Future repayment usually includes interest that profits the lender. The borrower benefits because of the convenience and immediate access the lender is supplying the borrower with. Credit is so convenient that you can find it in our daily lives but essentially you can boil it down to two kinds of credit:

  1. Open-Ended Loans: loans made on a continuous basis (eg credit cards)
  2. Close-Ended Credit: a one-time personal loan for expensive products


But there's no such thing as a free lunch! Credit comes with its costs. From its annual fees that are required to the interest (annual percentage rates) to credit limits that charge you for going over the maximum amount. You don't have to worry about interest if you pay your entire balance before the due date because this causes you to avoid interest.


To determine whether or not you get credit, and how much you get if you do, is determined by your credit score. Your credit score is based on the Credit Bureau's Credit Report, also known as a Credit History, on you. This tracks the kind of purchases you make, your responsibility in paying bills, whether you're financially stable, and essentially, allows the lenders (usually the banks) easily see your creditworthiness. Your creditworthiness evaluates whether you are responsible enough to complete your debt obligations.

Learn the Lingo!

  • Annual Fee - Required amount of cash you have to pay every year. Usually $15-100.

  • APR - 0% to 29%; pay entire balance by due date then no interest.

  • Grace Period - the period of time a credit card company gives you to pay your new charges, without having to pay interest on the new balance. The grace period runs from the end of a billing cycle to the next payment due date.

  • Credit Limit - The max amount of cash you can spend using a card. Going over the limit will result you with a penalty fee or deny the card. Approx $30 for each charge made beyond limit.

SMARTER CONSUMERS

Don't Fall Into the Credit Card Trap!

Want to control your credit card costs?

  • 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

  • Other tips:

    • Avoid too many cards, pay cash, don’t miss payments, read what you sign, avoid identity theft, seek credit counseling if needed, beware of bankruptcy