The Basics of Credit

By: Michal Furtak

The Basics of Credit

Big image
Credit is the ability to borrow $$ in return for a promise of future payment. The forms of credit are the loans and credit cards. Costs associated with credit are paid with interest.

To determine if one is able to get a credit, he must demonstrate his creditworthiness.

Lenders judge this by using 3 factors:

  • Character
  • Capacity
  • Capital
Credit Bureau is the association that collects all the information about every adult's income and payments. With that they determine individual's credit score to see if he is willing to pay bills on time.

Vocabulary Watch

Big image
Credit Limit-is the maximum amount of credit that a financial institution or other lender will extend to a debtor for a particular line of credit.

Check-Document that authorizes person to take money out of your account.

Check register-Current running log of money you’re spending.

Money order-A printed order for payment of a specified sum, issued by a bank or post office

Credit Cards: What You Need To Know

Credit cards are plastic cards that you can pay with. By using credit card you pay with credit which you have to pay later at the end of the month. When getting a credit card you must pay Annual Fee which could be anywhere from $15 to $100 minimum. Credit card have interest rate anywhere from 0% to 29% depending if you pay entire balance on due date. WHen using the card there is a credit limit. Credit limit is the maximum amount of money you can spend using the card. If you go over it you will pay penalty fees. Going over credit limit is called Over-the-limit fee.

Smart Consumers: Don't Fall Into Credit Card Trap

Big image
When using credit cards, there are couple tips you should follow in order to be safe.

  1. Never give your card to anyone you dont know.
  2. Make sure you card is in a safe place.
  3. Make sure to check how much money you're able to spend before you buy something.
  4. Pay your credit card payments before the due date so that you wont have penalty fees.
  5. Try to avoid using your card over the internet.
  6. Keep your cards and bills organized.