Being Smart With Credit

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The Basics of Credit

Credit is the ability to borrow money in return for a promise of future payment; Or in other words - Buy now, pay later. There are two types of credit: personal (or student) loans and credit cards. Loans can be received from a lender for things such as mortgage or tuition. To receive a loan or credit card, you have to be approved by the place you are getting it from. Your chance of approval and how much credit you receive depends on things such as your creditworthiness, credit score, and credit report.


Creditworthiness is measured in three parts.

Capital: the value of what you own

-Savings, investments, property
Capacity: your financial ability to repay loan

-High enough income
Character: your sense of financial responsibility

-Dependability

-Steady job

-Residence

-Credit history

All of this information and more can be received from the Credit Bureau.


Credit is not free. You must pay interest (APR), which differs depending on where you are either getting a loan or which company your credit card belongs to. Your interest is also determined by your credit score.



In this newsletter, you'll learn more about credit cards.

Vocabulary Watch

Credit Cards: What YOU Need to Know

A credit card is a small plastic card issued by a bank or business that allows you to borrow money from the bank to make purchases. Credit cards can be used anywhere where they are allowed; a lot of people tend to use them when buying a house or car.


Always make sure to do research on the card you are getting beforehand to find out about the credit card costs: if they have an annual rate, what the interest rate (APR) is, why kind of penalty fees and over-the-limit fees they have, how long the grace period is, what's the credit limit, and if any special features or rewards are offered. Most, if on all, of this information can be found in the fine print when you apply or get your credit card. Never skip the fine print.


One big benefit to having a credit card is having the power to make bigger purchases. Another big benefit is being able to use them in unexpected emergencies and not having to worry about coming up with all the money right this second.

Don’t Fall Into the Credit Card Trap

Just because a deal look appealing and you have a credit card to take it, doesn't mean it's always the best choice. Be smart when it comes to using your credit card.


Do...

-make wise decisions about purchasing items with your credit card

-review your credit card statement thoroughly

-look out for warning signals of debt

-pay off your balance every month


Don't...

-apply for a credit card without reading the terms

-use your credit card to buy things you can't afford

-get a credit card for promotional offers

-ever skip a payment