By: Joe Sansone
The Basics Of Credit
What is credit? The ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.
What are the forms of credit? Student loans, credit cards, etc. Loans, secured loans. unsecured loans, installment loans, credit cards.
What costs and benefits are associated with credit? Benefits: Make purchases over the phone or online, build credit history, records your expenses, etc. Costs: Chance or large sums of money being stolen, debt, possible fraud, people are compelled to spend more than they have.
What determines if someone gets credit and how much they get? Credit score, personal income, debt to income ratio, spending habits/ history, creditworthiness.
Annual Fee- Yearly cost of owning a credit card. Many credit card companies offer cards without this.
Credit Worthiness- An assessment of the likelihood that a borrower will default on his or her debt obligations. It is based upon factors, such as his/her history of repayment and credit score. Lending institutions also consider the availability of assets and extent of liabilities to determine the probability of default.
Interest- Money paid regularly at a particular rate for the use of money lent, or for delaying the repayment of a debt.
What You Need To Know
A credit card is a small plastic card issued by a bank, business, etc. Credit cards allow the holder to purchase goods or services on credit instead of debit or cash.
Credit cards can be useful for purchases online, over the phone, gas stations, stores, when buying a home or a car, restaurants and overseas.
Benefits of using a credit card: Building good credit, credit limits, being able to buy a vehicle or home, having cash in a secure place, being able to order items from websites
Costs of using a credit card: Card fees, annual fees, penalty fees, over-the-limit-fees, convenience fees, interest / APR, surcharges, fraud, credit limits and debt.
Advice For Credit Card Holders
- Pay your bills and fees on time
- Apply for a credit card from somewhere with the lowest APR rates
- Set a budget
- Understand the terms of the credit card
- Pay in full
- Play with interest rates
- Avoid cash advances
- Don't purchase items off of suspicious or non-trustworthy websites
- Don't go over your limit
- Don't share credit card information
- Don't Carry all of your cards on you at once