The Basics of Credit :)

Marissa Gollogly

Section 1: What is credit?

Credit is the ability to borrow money and being able to pay it later for a future payment. Every credit card comes with interest. You can get credit from a bank or in other words a lender. You receive credit in loans or in a credit card.

What are forms of credit?

One form of credit is installment credit. You use borrowed money and promise to pay in equal amounts over a specific period of time. Another form of credit is revolving credit which borrows you money as long as your account is in good shape. You repay the amount in full or partial depending on your interest or fees. For example you can pay back the interest with personal loans.

Road to good credit!

$ Costs that come with credit $

What costs are associated with credit?

You must pay an annual percentage rate (APR) which is interest. In other words you are buying now and paying later or annually. If you are late in paying you will also receive fees.

What determines if someone gets credit and how much do they get?

You receive credit if you have the reliability to pay back a loan. Lenders are able to decide your creditworthiness by using 3 factors which are character, capacity, and capital. This info come from your loan application and credit bureau. They also check your credit report to see if your account is in good standing. Your credit score is another important factor, the higher the better. The amount you get is based off your credit score and interest rate.

Section 2: Vocabulary Watch

  1. Collateral: Funds that are lend or borrowed.
  2. Credit History: A record of an individuals past borrowing or repaying behavior.
  3. Deductible: A specified amount of money that the insured must pay before an insurance company will pay a claim.

Section 3: What you need to know about a credit card.

What is a credit card? A credit card is a plastic card issued by the bank for the purchases of goods and services on credit. A credit card does come with a credit limit.

Where can you use credit cards? With credit cards you can buy things from different places, (mall, restaurants, etc.) withdraw money from an ATM, and make balance transfers. Different interest rates may apply to these different transactions.

What are the benefits and costs of using credit cards? Allows you to use credit for the purchase of more goods. It also offers cash back, points, and airline miles. The costs of credit would include annual, penalty, and over the limit fees.

Section 4: Be a smart consumer! Don't fall into the credit card trap!

  • First things first, limit yourself. People who overuse credit fall into heavy debt.
  • Pay credit card balance in full and avoid minimum payment trap.
  • Avoid too many cards, try to pay in cash when you are able too.
  • Read what you sign!
  • Avoid identity theft
  • Beware of bankruptcy
  • Choose your card wisely, the less expensive, the greater the benefit.