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RealMoney101www.hesaa.org24CreditThetermcreditreerstoacontractualagreementinwhichaborrowerreceivessomethingovaluenowandpromisestore-paythedebttothelenderatalaterdate.Apersonscreditpro-letypicallydeterminesorwhatpurposehowmuchandhowlongandatwhatinterestratestheywillbepermittedtobor-row.Younotonlyneedtomanageyourmoneywiselyyoualsoneedtomanageyourcreditwisely.Havinggoodcreditmakesitmorelikelythatyoucangetnancingwheneveryouwanttomakeamajorpurchasesuchasacarorhome.Maintaininggoodcreditmakesyoumoreattractiveasaborrowerwhichcantranslatetopayinglowerinterestratesthanapersonwithpoorcredit.CreditCardsCreditcardsareattractivebecauseotheirconvenience.Imag-inehowdifcultitwouldbetomakeahotelreservationorrentacarwithoutacreditcard.Howeverinordertoreceiveacreditcardyouneedtohavedecentcredit.Creditcardcompaniesdontnormallygivecreditcardstopeoplewithsuspectcredit.SelectingacreditcardandkeytermsWhenselectingacreditcardyoushouldshoparoundorthebestdealbasedonyourbudgetandrepaymenthabits.Herearesomesuggestionsthatwillassistyouinselectingacreditcard.Alowannualpercentagerate.Thelowertheratethelessin-terestyouhavetopay.Bewareoteaserratesthatincreaseaterayearorlessoriyouarelateinmakingapayment.Theinterestratecalculationmethod.ThisaectshowmuchinterestyoupayevenwhentheAPRisidentical.Thestandardmethodocapitalizationisoncepermonth.Lowornoannualees.Itheissuerchargesanannualeeaskthemtowaiveitdevelopyournegotiatingskills.Reviewallotherchargessuchaslatepaymenteestransac-tioneesoverthelimiteesetc.Thesehiddeneescanin-creaseyourdebtsubstantially.Agraceperiod.Nottobeconusedwithagraceperiodonyourederalstudentloansthisthenumberodaysyouhavetopayyourbalanceinullbeorethecardissuerstartstochargeinterest.Thisnormallydoesnotapplyiyoucarryabalanceortakeacashadvance.Pleasenotenotallcreditcardissuerswillprovideagraceperiod.Creditlimit.Itisagoodideatostartsmallanywhererom500to1500untilyouarewelldisciplinedenoughtohan-dleahigherlimit.Wideacceptance.Amajorcreditcardisconvenientandeasiertomanage.Servicesandeaturessuchascashrebatesrequentyermilesextendedwarrantiesetc.Typesofcredit1.RevolvingCredit-Consumercreditlinesthatcanbeuseduptoacertainlimitorpaiddownatanytime.CreditcardssuchasVisaorMasterCardareexamplesorevolvingcredit.2.InstallmentCredit-Aloanborrowedoraspecicpurposethatisrepaidwithinter-estinequalperiodicpayments.Examplesoinstallmentcreditarehomemortgag-escarloansandstudentloans.3.OpenCredit-Unlimitedpurchasingpow-erthatmustbepaidinullattheendothebillingcycle.AmericanExpressGreencardisanexampleoopencredit.DebtManagement