Personal Finance CREDIT BY MR. BROWN

Topics  What is credit, and why it is valuable?  Building and Growing Credit  Credit Card Specifics  Charge Cards

What is Credit?  Credit: the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.  How do you build credit?  Maintain a balance on a credit card less than or equal to 30% of your limit  Make payments on time, and above the minimum payment  Student loans  Other loans, with a guarantor (another person with established credit)

Why is credit valuable?  Having credit allows you to use more credit: higher limits, lower rates, more frequent credit approval  Credit is commonly used on goods or assets too expensive to purchase outright  Credit can be checked when applying for a job  Credit can be used as a gauge of character

Credit Cards (Visa, Mastercard, etc.)  Various perks (air miles, cash back, balance transfers, road side assistance)  APR (Annual percentage rate): the effective rate of interest charged to the card holder over the course of the term year.  Credit Limit  Minimum Payments; always pay more!  Credit Breakdown: Payment history (35%),Credit utilization (30%),Length of credit history (15%),Types of accounts in use (10%),New credit (10%)  Fees: Annual fee, Balance transfer fee, Foreign transaction fee, Late payment fee, Over-the-limit fee (some-cards)

Charge Cards (AmEx)  A charge card: a credit card where the entire balance must be paid off at the end of the billing cycle (usually a month).  No interest (rather a fee if not paid off on time)  Annual membership fee  No clear limit