Credit Basics

By:Jonathan Soto

What is Credit?

Credit is the ability to borrow money and pay it off later in future.This can come in different forms.Credit cards come with a limit on how much you can borrow but if you pay the full balance within a grace period you wont pay interest.Personal Loans is payed over a period of time with a fixed amount and interest.Interest can vary on how good/bad your credit score is.Having A Credit Report showing many lenders checking your credit and seeing if you creditworthiness is a sign that you don't have good credit.

What are the benefits of credit?

One big benefit is you don't have to carry cash.You can use money you don't have yet to buy things that will require a lot of saving to buy (car,house,ect.).If lose you can pause your account or close it and your money will be safe unlike cash.

What determines how much credit you get?

2 of the factors are how much income you make and whats your credit score.It lets lender see if you have the money to pay the loan back and if you are reliable.

What is a Credit Card?

A Credit Card is basically A big wallet with lots of money but it belongs to the bank.You use the bank's money to help you pay for what you want.But that wallet has A limit and thats called your credit limit.if you go over the limit there will be an Over-the-limit fee.At the end of the year you pay an annual fee for using the credit card unless you A new member then you could have deal that you don't have to.

Where can you use A Credit Card?

You can use a Credit card at clothes stores,food,gas,entertainment almost everything every person buys.But if you don't pay back the money you borrowed you will receive penalty fees.

Pros and Cons of Credit card

Pros: are purchases will be more efficient and easier,You can still buy thing even though you don't have the money right now.

Cons: Interest rate(APR) will make your debt higher by percentage if not payed off as quick as you can.

Sources:

Understanding Credit - What Is Credit?
How Are Credit Card Limits Determined? - Credit Karma Answers