How To Deal With Your Money

The Basics of Credit

Credit is something for someone to obtain goods or services without paying immediately. Credit is the best way to pay for goods and services that you cannot afford in the current moment. Credit can also be defined as personal loans (house loans, school loans, car loans, etc.).

When using credit cards you are building a credit score; a number that shows lenders how reliable someone is to pay back their loans. The credit bureau finds the information to decide the creditworthiness of an individual and makes that information available to lenders. They decide this information off your credit report. Depending on your creditworthiness, the lenders decide on your credit interest.

Vocabulary Watch

Credit Cards: What You Need to Know

Credit cards are plastic cards issued from the banks, allowing customers to purchase goods or services on credit. Credits cards have a credit limit set by the lenders. When you try making a purchase over your credit limit, you suffer with an over-the-limit fee. The banks sends you a bill every month after looking at all your credit purchases. If you do not pay in full by the due date, you suffer penalty fees. Annual fees are less common since the 80's and 90's and are separate fees from the interest rate on purchases.

Smart Consumers

When you choose to pay with a credit card and you hand the card to a cashier or submit your card number over a secure internet connection, the merchant you’re dealing with validates your account and whether the bank will allow the purchase to go through. Many companies are involved with each swipe. Merchants pay fees to accept credit cards, and eventually the card-issuing banks receive part of this as revenue.