Credit Basics
What is credit?
Borrowing money with the promise to pay it back later
What is a credit card?
A card that allows you to borrow money to make purchases
What is interest?
The cost of borrowing money
Should you pay your bill on time?
Yes
What is a credit report?
A record of your credit activity
What is a lender?
A person or company that gives you money
What is a minimum payment?
The smallest amount you must pay each month
What does APR stand for?
Annual Percentage Rate
Is it smart to max out your credit card?
No
What is a credit score?
A number that shows your creditworthiness
What is a borrower?
A person who receives and must repay money
What happens if you only pay the minimum?
You pay more interest and take longer to pay off debt
What does a higher APR mean?
You pay more in interest
What is one benefit of using credit responsibly?
Builds a good credit history
What can hurt your credit score?
Late payments
What is a credit limit?
The maximum amount you can borrow
What is an annual fee?
A yearly cost for using a credit card
What is a finance charge?
The total cost of borrowing (interest + fees)
What should you do before using credit?
Make a plan to repay it
What can improve your credit score?
Paying on time and keeping balances low
What is a credit history?
A record of how you have used and repaid credit
What is a grace period?
Time to pay your balance without being charged interest
What happens when interest builds on unpaid balances?
Your debt grows over time
What is a major risk of misusing credit?
Getting into debt
Why do lenders check your credit score?
To decide if they should lend you money