Credit

Natalia Purta

Basics of Credit

Credit is a contractual agreement where a borrower receives something now and agrees to repay the lender at a later time. Although it seems like a luxury, it's important to realize the costs that come along with it.


Credit can be used to repay multiple things, such as:


  • student loans
  • credit cards
  • mortgage payments
  • car payments
  • personal loans



The greatest advantage of credit is that you are free to buy now and pay later. However, with that comes the high APR (Annual Percentage Rate) or what we know as interest.


How do you get credit, you ask? Well it all depends on your creditworthiness. The credit bureau will assess you based on if you pay your bills on time and if you seem like a trustworthy client. They'll send credit companies your credit report so that they know of your credit score. Your score will go up and you’ll be more likely to get more credit if you do pay your bills on time.

Credit Cards

Credit cards are life savers, as well as life ruiners! They are cards that one receives with a credit limit to buy things now and pay for them later. Today, credit cards are accessible almost everywhere and replace the need to carry around cash.


Benefits

  • Don't have to carry cash - convenience
  • Creates a record of purchases
  • More convenient than writing checks
  • Consolidates bills into one payment
  • Security of not carrying money
  • Build good credit


Costs


  • Penalty fees (paying bills late)
  • Financial difficulties may arise if one loses track of how much has been spent each month
  • Increased impulse buying
  • APR (interest rate)
  • If you overspend, there is a fee
  • Annual Fees

Chase Freedom Unlimited vs. Discover it


Chase Freedom Unlimited Card


This card has an annual fee of $0 making it a bonus! Its APR is 0% for the first 15 months, and after that it's between 14.24% to 23.24%. There are some fees though. The late payment fee is up to $15 if the balance is less than $100; up to $27 if the balance is $100 to less than $250; and up to $37 if the balance is $250 or more. If you want to transfer your balance it'll be either $5 or 5% of the amount of each transfer, whichever is greater.

For a cash advance, it costs either $10 or 5% of the amount of each transaction, whichever is greater. You get 1.5% cash back on all your purchases!


Discover it Card

This card also has an annual fee of $0! There is 0% APR for the first 12 months; however, the interest after that is between 11.24% to 23.24%. The late payment fee happens to be $0 the first time; and after that, up to $35. To transfer a balance it's 3% of each amount. For a cash advance it's either $10 or 5% of the amount of each transaction, whichever is greater. You get 5% cash back in categories that change each quarter, up to the quarterly maximum when you sign up. And you also get 1% cash back on all other purchases. You also get 25 days to pay your bill compared to the standard 21 days.

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Smart Consumers

If you want to have a credit card and make the best of it, you need to understand how to use it. Try not to have a large balance or one at all when having a credit card! With the high interest rates, you'll always be playing catch up and it'll be very difficult to pay off your balance. Tip: if you don't have a balance, you'll never pay interest! This is the most important tip I can give you: PAY YOUR BILLS ON TIME! As soon as you loan money, look for ways to pay it back as soon as possible. Don't buy things that you know you won't be able to pay off quickly. And if you do want another card for your non-essential purchases, make sure you have paid off a large amount on the other accounts. Non-essential purchases are exactly what they are called: Non-essential. Don't buy these things when you're in a lot of debt.