Don’t be stupid about credit!. A brief guide to using credit cards and loans wisely. The American love affair with credit. The first credit card was introduced in 1958 – American Express. The American love affair with credit. The first credit card was introduced in 1958 – American Express
A brief guide to using
credit cards and loans wisely
This is the maximum amount a credit card company will let you borrow at a time. A starting limit might be $5,000 or $8,000. Once you’ve established a good reputation for paying your bills, the limit is raised.
This is the amount the company requires you to pay each month.
It is usually ridiculously small, just a fraction of your debt. You may own $1500 but be required to pay only $15.
It’s best to IGNORE the minimum payment and pay the balance in full. If you do this, you can avoid paying any interest.
Principal or Account Balance
This is the total amount you owe. It is listed on each statement, or you can check it online or by phone at any time.
Pay off the balance in full each month. Don’t charge more than you have in the bank.
This is what they are charging you for the privilege of spending their money.
While home loans are about 5-6% and college loans a little higher, credit card interest rates are usually 15-30%. Scary.
Some credit card companies also charge you an annual fee, like $50, for the privilege of using their card.
Look for one that doesn’t.
Unlike interest rates and fees, points are a GOOD thing.
You can earn a point for each dollar you spend with your credit card, and you can redeem those points for cash, airline tickets, or other gift items.
Cards with points usually charge higher interest, however, so be careful.
Every time you use a credit card or get a loan, it gets reported to a credit agency.
The agency tracks your behavior – whether you repay on time or not.
Your accumulated payment history becomes your credit rating – a score of 300 to 850 that shows future lenders how reliable you are.
Credit is basically a loan.
You can also get a loan from a bank, an auto dealer, a credit union, a family member, a college or another source.
A loan is simply borrowed money – and it usually involves interest.
A mortgage is a special kind of loan – it’s only a loan for a house.
Mortgages usually have lower interest rates because the buyer has “collateral” – the house.
If a buyer fails to make the mortgage payments, the bank can foreclose, which means the bank takes the house.