Credit and loans

What do I need to know?Credit card • revolving access to a fixed sum of

money

…revolving…?• you can spend up to your credit line• whatever gets paid back monthly is

available again…credit line?• amount of credit you can use

….it’s gonna cost ya….

interest• money you pay to use credit or borrow

money

APR = annual percentage rate• rate at which interest is calculated

finance charge• interest charged on the amount you owe

…..and cost ya…..annual fee• once-yearly charge for using a credit card

late payment fee• (snooze, you lose) – usually about $25

over the limit fee• charged if you exceed your credit line

…yes, there’s more….

cash advance fee• charged for withdrawal of cash cash advances usually carry high interest

rates!!

grace period• time between when you’re billed and the

due date (3-4 weeks)

your interest rate can go up if you’re late or exceed credit line!!

……what about loans?

loan• borrow a lump sum of money and pay back over

timeloan note• detailed loan agreement between lender & borrower• READ the fine print before you sign!!!

principal• amount borrowed

term• length of time to repay the loan

….and…….secured loan• borrower puts up collateral to guarantee loan• …and if you don’t pay it back…say bye, bye!!

Unsecured loan• No collateral

fixed rate• interest and monthly payments stay the same

for the term of the loanvariable or adjustable rate• interest rate changes during the loan term

…so….is credit a good thing or a bad thing…??

Benefits….• you can get stuff you don’t have the

money for!! duh!!• good for emergencies – for things you

need – if you know you can pay for over time

Dangers…• you don’t have the money to pay for the

stuff you bought! …again…duh!!• DEBT!!!