crediting

Credit terms


APR (Annual Percentage Rate) – The interest rate for one year

Credit limit – the maximum amount of credit extended to you by a bank or credit card issuer.

Late fee - a penalty, in addition to interest that is charged if payment is received after the due date.

Minimum payment – the lowest amount you must pay toward your credit card balance each month.

Interest – the price of using credit.

Annual fee – the yearly charge for having a credit card.

Grace period – a period of time during which you are not charged interest on new purchases.

Interest rate – the amount of interest you must pay for the credit you use – usually expressed in a percentage.

Advantages of using credit cards:

• Establish credit history.

• Safer than cash.

• Use for internet purchases.

• Use for reservations.

• Use as an interest free loan if paid before the grace period ends

Disadvantages of using credit cards:

• Get into much dept quickly – takes a long time to pay back.

• Interest rates are extremely high.

You can get a credit card when you are 18 years old. If younger, you can still have one as long as you have a co-signer.

The grace period is important to be aware of because you can make purchases interest free during that time. That’s like getting something you want know and not paying interest as long as you pay off the balance before the grace period is over. Most grace periods are 28 days.

Some people have to pay higher interest on loans than others because they have bad credit history and are a risk to the lender.

The Fair Credit Reporting Act governs all creditors must furnish accurate and complete information regarding a person’s credit history.

Creditors have to disclose (“tell all”) all terms of credit agreement because of the Truth in Lending Act.

Pay day loans (Ex: Check into cash) is a bad option for credit because they charge very high interest (500% in some cases) and usually hold your car titles as collateral. Lots of people choose these types of loans because there isn’t a background credit history check.

Behaviors that can affect your credit rating where banks may consider you a risk prohibiting you from getting credit:

• Moving around and switching jobs.

• Having lots of credit cards.

• Pay your bills late (even just 1 or 2 payments)