How to get it, use it or sink it in the world of credit

The What, Why and How's of Credit

When it comes to your budget there is one thing to keep in mind at all times; what do I earn, what do I save and how will I spend it. Will the spending be for what I need or what I want. There is nothing wrong with wants, but needs should always come first and wants second. So how do you pay for the needs and wants if you dont always have the cash on hand? Most will use credit in some form.

Credit used by most people are credit cards. These are cards in which you apply for and are provided by banks or companies called lender and who charge interest on your balances. Credit cards allow you to use the card to purchase cloths, food or personal items you need or want. To apply for the credit card you will complete the application process and your credit report will be viewed by the lender, bank or credit card company. These compaines and or banks will use your credit score to determine your crediworthiness. The information on your creditworhniess and credit scores are reported to credit bureas. These reports have your personal information, social security number, credit you have and payment history in file.

Loans are another form of credit and most hold loans called mortgages, car loans, student loans or personal loans. The mortgages are loans on a home. Student loans is money you owe to a lender for college, car loans or auto loans are owed to the bank for the car you purchased, and personal loans can be for items you purchased and took the loan out for. One thing to keep in mind concerning loans and credit cards is the inerest rate you pay on each of these types of credit. The higher the interest or APR (annual percentage rate), the rate of interst you pay on your balance over a year, the more you will pay back to the lenders or credit card companies.


Credit Cards

Credit cards come from many different banks or credit companies. Each card can have different interest rates or APR, and fees monthly. You should research the different card companies, and pick one that is best in interest rates that meet your budget. The card you are given will be based on your income, your credit score, and credit worthiness. Credit cards should be used wisely, and part of your monthly budgets if you have them.

Credit card companies charge over the limit fees if you go over the amount of credit you are given. When you apply for credit you will be given a credit limit. This is the amount you are allowed to charge up to or use on a loan. The insterest is added to your balance and the extra fees you are charged when you go over the limit or miss a payment.

Using credit should be only when necessary and based on your income too. If you budget well the advantages are good. When you pay on time and use it properly you can get good rates and higher credit scores. Credit should be used for emergencies such as repairs to your car, and only if you know you can pay back the balance. Sometimes using your credit cards are good for traveling instead of cash, but again use caution and only if you know you can pay back the balance or meet the monthly payment. The benefits of good credit is great interest rates on future credit cards, loans such as a car and mortgage. Even student loan rates can be better with good credit, and you dont need a co-signer to help you to get a loan.

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Smart Consumers Don't Fall Into Credit Traps

Credit card companies are always sending you information about great benefits and interest rates on their credit cards. Don't be "pulled" into these ads and options just because they promise better rates and low payments. Some ads make it look like having a card is the answer to everything you want. What they don't tell you about is you might not be able to afford the credit card interest rate and monthly payments. Young people especially, are targets for the credit card industry because they don't always make good choices or spend money on wants more than needs. For every dollar you spend the credit card company gets the interest on the balance you have left each month to pay back. These companies already know that young people will carry a balance and never pay it back in full so they earn on the balances while you keep making minimal payments, called your monthly payment.

Credit cards are great for having to build your credit history, and good for emergency spending when cash is not available. But, using credit without knowing your budget or having a way to pay back the balance becomes a real problem. When you get a credit card offer, dont jump right in and apply. If you apply for a card make sure you can meet the monthly payment and only spend what is necessary within your budget plan.