Using Credit Wisely Definition of Credit

Transcript:Using Credit Wisely Definition of Credit:
Using Credit Wisely Definition of Credit Confidence in a purchaser’s ability and intention to pay, displayed by entrusting the buyer with goods or services without immediate payment Credit is basically a loan that has to be repaid according to specific terms Credit Cards v. Debit Cards Credit Cards Not directly linked to a bank account Costs added to your balance immediately; payments only expected once per month Charge interest for “carrying a balance” – the privilege of paying over time Debit Cards Linked to a checking or savings account Deduct funds immediately No interest charges Usefulness of Credit Allows people to purchase items they wouldn’t otherwise be able to afford if they had to pay in full immediately “Big-ticket” items house, car Long-term expenses college education Unexpected expenses hospital stay, car repairs Dangers of Misusing Credit Can be used to purchase things that are beyond a person’s means to pay back Making only minimum payments, especially with high interest rates, leads to paying much more than the original purchase price Missing payments negatively affects your credit score A low credit score can impact your ability to get credit in the future, to rent an apartment, and even to get a job Credit Cards & College Students College students are often inundated with credit card offers Many college students still need a co-signer Someone who agrees to take responsibility for the debt if the cardholder cannot pay Required for applicants who don’t have extensive credit history yet or who have a “risky” credit history College can be an excellent time to start establishing a credit history by using a credit card responsibly Facts and Figures 70-86% of undergraduate college students have at least one credit card The majority of students carry a balance from month to month that is subject to interest charges The average balance is approximately $3100 “Best Practice” Tips for Responsible Credit Card Use Shop around for a credit card Do your homework and research each card Take a long-range view of the card’s terms and benefits Read the “fine print” very carefully Set limits and stick to them Limit yourself to 1 credit card Use it only for emergencies or for certain expenses “Best Practice” Tips for Responsible Credit Card Use Making Payments Make all payments on time Avoid interest charges by paying off your balance in full each month If you must carry a balance, pay