Personal FinancePersonal Finance

Ms. RossMs. Ross

Spring 2009Spring 2009

CreditCredit

Credit is the ability to obtain goods Credit is the ability to obtain goods and services before paying for them, and services before paying for them, based on a promise to pay later.based on a promise to pay later.

Thus, each time a person uses credit, Thus, each time a person uses credit, he or she is in effect borrowing he or she is in effect borrowing money.money.

Revolving CreditRevolving Credit

This is credit that is available up to a This is credit that is available up to a limit and automatically renewed as limit and automatically renewed as debts are paid off or paid down.debts are paid off or paid down.

People who use revolving credit often People who use revolving credit often make partial payments on their make partial payments on their unpaid balances at regular intervals.unpaid balances at regular intervals.

For example, credit card accounts For example, credit card accounts offer revolving credit to users.offer revolving credit to users.

Credit, Friend or Foe?Credit, Friend or Foe?

Unwise use of credit can lead people Unwise use of credit can lead people to spend more money than they can to spend more money than they can afford to pay back, reducing their afford to pay back, reducing their ability to make purchases or save ability to make purchases or save money in the future.money in the future.

Compound interest can work against Compound interest can work against you if you use credit cards unwisely.you if you use credit cards unwisely.

When well used, however, credit can When well used, however, credit can provide many benefits.provide many benefits.

Credit, Friend or Foe?Credit, Friend or Foe?

Credit can be used to deal with Credit can be used to deal with emergency situations or to purchase emergency situations or to purchase valuable assets such as an valuable assets such as an automobile, a home, or an education.automobile, a home, or an education.

It is in your best interest to learn to It is in your best interest to learn to analyze the costs and benefits of analyze the costs and benefits of using credit.using credit.