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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