In September, Luciana is approved for her first credit card! She grabs her purse and visits her local appliance stores perusing the aisles for the best deal on a refrigerator. After careful evaluation of the different brands and added features she purchases an Energy Star refrigerator with her new credit card. Once home she excitedly awaits the arrival of her purchase enjoying the benefits of using credit to purchase an item her family desperately needs but lacked the ready cash capital to purchase.
Although Luciana and her husband are both employed they found that with their monthly mortgage, electricity and water bills that they could only make minimum payments on their purchased Energy Star refrigerator. Luciana evaluates the cost of having purchased the refrigerator on credit. The price of the refrigerator was $1,500. The interest rate on her credit card was 24%. She calculates that with minimum monthly payments, the cost of the refrigerator plus interest comes to $2,438.13!
As Luciana found there are strings attached to using credit. It costs something. If you are thinking of opening a credit account your first step should be to figure out how much it will cost you and whether you can afford it. Then you should shop for the best terms. Important terms to understand:
- Interest is the amount the lender charges you to let you use their money. It is a percentage of the principal (charged per year, month, or week.)
- Fees cover the lender's costs to review your credit application or to service your account (maintenance fees, service charges, late fees).
Under the Truth and Lending Agreement, the creditor must tell you in writing before you sign an agreement the exact terms. Check the back of the credit card agreement form to review the interest rate, annual percentage rate (APR), and additional user fees. Creditors must tell you when finance charges begin, the default APR and the grace period to pay your purchase balance in full before you pay a finance charge. Study these terms carefully. Understand that these terms can change 15 days upon written notice from creditors. Take charge of your credit! Contact your creditors to ask for the best terms.
Your Money & You Staff have written a series of finance related articles. For additional information on related topics, visit http://yourmoney.accion.org
- Related Videos
- Related Articles
- Ask / Related Q&A
- Apply Online | Credit Cards for People With Bad Credit
- Online Applications | Credit Cards for People With Bad Credit
- Apply For Credit Card-Getting Approved For A Credit Card Can Be Difficult
- Bad Credit Car Loans by Auto Credit Superstore
- 5 Credit Tips for College Students
- Best Credit Repair Services
- Facts on Credit Repair and Pitfalls
- Apply Online | Secured Credit Cards for Consumers With Imperfect Credit
Home Insurance Quotes Online: The Easier and Faster Alternative
By: don robert | 26/11/2009Searching for insurance companies online is easy and can be accomplished by simply entering keywords such “home insurance” in the search boxes of search engines like Google.
Best Way To Get Free Money For School
By: Jazmine Young | 26/11/2009The free money comes in the form of scholarships and the amount you could win can be very high. You can expect to get up to $10,000 in free financial aid for school that you will never have to pay back.
Six Starter Investing Real Estate Opportunities
By: Michel Lautensack | 26/11/2009Investing Real Estate opportunities are something that you really will want to consider if you have the funds available or the lending sources in place.
Apartment Real Estate Investing
By: Michel Lautensack | 26/11/2009One of the easier types of real estate investment for the most part when first starting out is perhaps apartment real estate investing. There are a couple of reasons for this.
Mortgage Refinancing - Consider All These Facts Before You go For Refinancing
By: Thomas Jones | 26/11/2009For the past few years, several people have happen to be caught up with home mortgages that have high rates and tough norms. At present, since interest rates along with home prices have dropped considerably, it makes sense to look at the choice of refinancing a home mortgage. If you...
Mortgage Refinancing Made Simpler
By: Raul Crasmin | 26/11/2009Given that at first you could not get the best rate. Perhaps you did not have twenty percent to put down or perhaps your credit required a bit of rejuvenation. If you have been in the home for some years now and you have build up some equity, it might...
Mortgage Refinancing - Tips on Mortgage Refinancing
By: Marie Mardeko | 26/11/2009With the current mortgage market changed for the best it makes sense to refinance your existing costly mortgage. Over the past few years before the recession many people were caught up with expensive home loans with hard preconditions. Now with mortgage rates and home prices at their record lows it...
Current Mortgage Rates - All You Wanted to Know About Mortgage and Mortgage Rates
By: Peter Rivers | 26/11/2009A mortgage property is collateral for the obligation, often the payment of a balance due. Even as a mortgage is not a debt, it is indication of a debt. It is a shift of an interest in property, from the possessor to the mortgage lender, as long as this interest...
Different Types Of Loans And Loan Options
By: Your Money | 30/10/2007 | FinanceA loan is the redistribution of money between a lender and a borrower. As a borrower, you receive an amount of money from the lender, which you will have to pay back later. This service is provided at a cost, referred to as interest, or annual percentage rate (APR). Installment loans...
Keeping A Daily Spending Diary And Small Business Record Keeping
By: Your Money | 21/09/2007 | FinanceHave you ever taken $20 out of an ATM and wondered later where it went? Start keeping a daily spending diary to keep track of where your money goes. Try it out for one week and you'll be amazed at how much you can spend on the little things like...
Warning Signs Of Credit Problems
By: Your Money | 14/05/2007 | FinanceAre you consistently charged late fees on all your bills? Is it hard to decide which bills to pay each month? Do you spend more than 20% of your net monthly income to pay for your credit cards? Have you ever borrowed money to make payments on existing loans? Are...
The Cost Of Credit
By: Your Money | 04/05/2007 | FinanceIn September, Luciana is approved for her first credit card! She grabs her purse and visits her local appliance stores perusing the aisles for the best deal on a refrigerator. After careful evaluation of the different brands and added features she purchases an Energy Star refrigerator with her new credit...
Smart Small Business Tax Deductions
By: Your Money | 04/05/2007 | ManagementIf you think that increasing sales is the only way to make a business more profitable, think again! Decreasing what you spend is as essential as increasing the amount you sell. From an office chair to an office building, every purchase you make for your business may be tax deductible....
Simple Market Research
By: Your Money | 27/04/2007 | FinanceAs an entrepreneur, you may know every detail about your small business, but can you say the same about your customers? In order to effectively market your products or services, you need to know who's purchasing them! Market research consists of gathering and analyzing data about your customers in order...
How To Handle Your Credit Cards
By: Your Money | 26/04/2007 | FinanceCredit cards have a bad reputation-many consumers dislike using them because they don't like the concept of borrowing money, or have fallen into debt in the past. However, the responsible use of credit cards can help you build healthy credit by establishing and maintaining an active credit history on your...
Insurance Basics For Small Businesses
By: Your Money | 26/04/2007 | FinanceNot having insurance is risky business. It's an expense that many business owners deem unnecessary, but adequate insurance coverage in times of loss is invaluable. As a small business owner, only you can decide what type of insurance coverage is best for your business. Take stock of the physical and...