All About Credit

How do I use credit?

When you use credit, it usually means using a credit card. It also might mean that you get a loan. A loan is another way to use credit.

Using credit means you borrow money to buy something.

• You borrow money (with your credit card or loan).
• You buy the thing you want.
• You pay back that loan later – with interest.

What is interest?

Interest is what you pay for using someone else's money. You repay money to whoever gave you the credit card or loan.

Credit cards and loans have different interest rates. Look for the "APR." APR means annual percentage rate. It is how much interest you pay during a whole year.

A lower interest rate means you pay less money. A higher interest rate means you pay more money. For example, a loan with a 2% interest rate costs less than a loan with an 18% interest rate.

When can I use credit?

Many people use a credit card to buy everyday things. You might use a credit card to pay for:

• Gas
• Groceries
• Services – like a haircut

Loans usually are for more expensive things. You might get a loan for:

• Furniture
• Education
• A car or home

Where can I get a credit card?

Banks and credit unions offer credit cards. They usually offer credit cards to people with a good credit history.

Some stores offer credit cards. You can use a store credit card only in that store. Sometimes these cards are easier to get if you do not have a good credit history. Sometimes a store credit card is a good way to build your credit history.

What if I can't get a credit card?

Banks and other companies offer secured credit cards. This means you deposit money with the bank. Then you spend that money by using the secured credit card.

A secured credit card works like a debit card. You use your money, not a loan from a bank. A secured credit card can help you build your credit history.

Where can I get a loan?

Banks and credit unions offer loans. They usually offer loans to people with a good credit history.

Some stores offer loans to buy their product. These loans often cost more money. Why? Because interest often is higher on a store loan than on a bank loan.

What if I can't get a loan?

There are other ways to borrow money. Some people go to a payday lender. Some use the title to their car to get a loan. Some people pawn things.

These other ways to borrow are expensive. They almost always cost more than going to a bank, a credit union or a store. Some people have problems with debt after using these ways to borrow. The charges can be very high. It is hard to pay the money back and get out of debt.