By Jackie Haff

The Basics of Credit

Let me start off by explaining to you exactly what credit is. Credit is the level of trust you put into a person. Putting this into financial terms; credit is how trustworthy you are with money. A way that this creditworthiness can be seen is through your credit score. When you have high credit, you're considered reliable with money in the eyes of lenders. If you have low credit you're considered unreliable.

There are many different types of credit that you will come across, some of the most common are student loans, personal loans, mortgage, car payments, and credit cards. Even though these types of credit differ from each other slightly, they all can effect your credit scores both positively and negatively.

One of the benefits from having credit is the ability to buy something without having the money on hand. The cost on the other hand is the temptation; being able to buy things without having the money have put many people into heavy debt. So, while having credit can make it easier to get money, it also makes far easier to lose money.

Now comes the question of how you get credit. You usually start earning credit when you establish a credit card. How much credit you get on your card is estimated by your job and income. Your While using your card, your credit history and information will be collected by the Credit Bureau and recorded in a Credit Report, this information will be made available to credit card companies, financial institutions, and so on. Also, you will be charged an interest rate while using your card, this is your Annual Percentage Rate or APR. This will be governed by how good your credit score is. The better the score, the lower the rate.

Credit Cards: What You Need To Know

Time for credit cards! First, the basics. A credit card is a little piece of plastic that allows you to make purchases on credit. Most credit cards don't have an annual fee, but all credit cards will have an interest rate. This percentage is considered the cost of borrowing that amount, and is added to your purchases that you will have to eventually pay back.

When using your credit card, there aren't many limits on where to use it. You can pretty much use a credit card anywhere that accepts credit, but usually credit cards are used to purchase items that you couldn't be able to pay for. For example a car, house, or even a vacation. While using your credit card though, pay attention to your credit limit. This is the amount that allowed to have on your card. If you go over this limit you will have to pay an "Over-the-limit" fee.

Now that we have some of the basics out of the way. Let's go over some advantages and disadvantages of using credit cards. One of the advantages is building up your credit score. If you pay off your bills quickly this positively effects your credit score; making you more reliable in the eyes of lender. Although this can easily have an opposite affect on your score if you don't pay your bills on time. Not paying your bills on time can result in a lower credit score and a multitude of penalty fees; such as a late fee or an increased interest rate.

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Shopping for Credit

Now comes the hard part; finding a credit card that suits you. For this section, I will compare two cards, and make a decision between them. The cards that I have chosen are a Discover card and a Journey card.

Both of the cards have no annual fee, and have a grace period of 25 days, but the APR for the Discover card ranges from 13% -22%, while the Journey card's APR is 20%. When it came to other fees I was able to find out more information from the Discover card.

Information such as:

- Late Payment: $35

- Returned Check: $35

- Balance Transfer: 3%

- Cash Advance: 5%

While as for the Journey card, I was only able to find out this much.

- Cash Advance: 3%

- Late Payment: up to $35

Then when I looked at the benefits that both cards offer; I found out that the Discover card offered 5% cash back on purchases such as gas, groceries, etc. and $20 cash back if you're a student with a GPA over 3.0. While as the Journey card only offered a 1% cash back on all purchases.

In the end, I decided to go with the Discover card. First, because of the added bonuses toward students, but most of all I was able to uncover more information about the card without having to put in my social security number. My best advice to you, if any, is to not commit to something without having all the facts, and especially in this situation when they expect you to give them your social security number without any valuable information.

When deciding to establish your own credit card; you should think about yourself and what you need in a card. You must consider what benefits that card offers that appeal to you. If your a student then try and find a card that appeals to students, like the Discover card I chose. If your a heavy spender, the try and find a card with low penalty fees. This card is your responsibility; make sure you take everything into account before making your decision.

Smart Consumer: Don't Fall Into the Credit Card Trap!

When you feel that you are ready to start using credit and establish a credit card. Please keep in mind the responsibility that comes with it. Unlike other forms of payment, credit is something that you will eventually have to pay back. Credit is a financial tool not money magic! Most people forget this fact, and dig themselves a hole of debt that they can't climb out of. As long as you don't indulge in impulse buying too frequently, and you keep track of your payments then you should be just fine.
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