Using Credit Wisely 21.3. Types of Credit Credit Card Allows user to charge amounts in different...

Using Credit Wisely21.3

Types of CreditTypes of Credit Credit Card

Allows user to charge amounts in different places

Given a credit limit, or maximum amount you can spend

Charge Account Credit that can be used at a certain

business ex: Macy’s, Kohl’s

Types of CreditTypes of Credit Loans

Used for large purchases: houses, cars Usually, you put some money down

(down payment) and the rest you pay off monthly

Secured loans Guaranteed by collateral- an asset like

the borrower’s home or car If fail to pay loan, the lender can take

the collateral

Disadvantages of Disadvantages of CreditCredit

Finance charges Fee based on the amount of money

you owe

Risk of Overusing May not be able to keep up on

payments Could turn into low credit score

Get help through American Consumer Credit Counseling or Consumer Credit Counseling Service

Costs of CreditCosts of Credit Annual Fees/Membership Fees

Finance Charges If you pay off balance each month,

you will not have to pay these charges

Annual Percentage Rate (APR) Your interest rate Lenders must tell you the yearly

cost of the loan

Credit ReportsCredit Reports Come from credit bureaus

Collect info on how much money people owe/how good they are at paying their bills

Get a credit rating- a number From 300-850