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Difficult to Obtain? – Credit Worthiness

You might be, as many people are, under the impression that establishing a credit certificate is a bothersome task. Not so, I assure you. If you can follow the advice here you will be able to achieve it easily. All you need is $400. You do not have it? Well, borrow it from friends or relatives. Beg, steal or borrow! Armed with this amount of money, walk into a bank and open a savings bank account and obtain the passbook.

With Revolving Credit a lender issues you a specific amount of money you can spend. This may come in the form of a plastic card, commonly known as a credit or charge card. If you apply for a credit card and are accepted you will usually receive the card through the mail. There are a few different forms of credit cards, and they are accepted by almost every business today. When used, it will track the purchases you make, and then these charges are subtracted from the sum of money you borrowed. Each month you will receive a bill statement telling you how much money you have left to spend, how much you must pay back, and often a listing of where and for the amount these purchases were made.

Making Payments on Revolving Credit – With revolving credit you are able to pay back as much you can afford as often as you would like. When your bill statement comes each month, you will normally see a minimum payment due. It is strongly suggested that you pay at least this amount each month. Typically, the less you have to pay back the lower the minimum will be. You also have the option to make additional payments throughout that monthly period. You make these payments until the amount you have charged is paid off. For each amount that you pay back that amount is then available for you to use again. Here is an example of how this works in numbers.

We are sure that you had attained some expertise in this particular act by now. Go to a third bank now and deposit the $400 you borrowed from the second bank. We do not even have to tell you what to do now, do we? Yes, get a loan of $400 from the third bank after a few days and proceed to a fourth bank. Only this time, remember to open a Checking Account and not a savings account as you have done on the previous three occasions.

You now have an amount of $400 in your kitty and it is time to put it to good use. Start paying back the money borrowed from the first three banks. You must not default on the payments and after some weeks, you will find that you have paid off a significant amount of money.

Unfortunately there’s a catch to using this form of credit. An amount of interest is added to the charges you make. This form of interest is known as APR – Annual Percentage Rate. It is possible to avoid this if you pay off the entire balance you owe with the first months bill. The APR you have to pay is applied to your balance annually. You will see this interest charge broken down into monthly amounts. The interest is like a safety policy for the lenders. They are letting you use their money to spend, and if you don’t pay it back both of you are in trouble. Interest rates can range from 5% and up, not limited to but usually around 24%. This percentage may be raised based on making your payments on time. Typically, if you make your scheduled payments you don’t have to worry about this going up. Here is a breakdown of how interest is applied using some figures from the example above.

Annual Percentage Rate (APR) of 10% A second-month statement balance of $60.00 the interest applied would be $0.50. Here is how the formula is applied: $60.00 x 10% = $6.00 – That is interest for a full year. You then divide that by 12 months for the added monthly interest. $6.00 / 12 = $0.50 – Giving you the second-month balance of $60.50.

Now you have the general knowledge on how revolving credit works. Making payments on your credit cards are very important for building your credit score. Having a good credit score will allow you to make big purchases, such as a car or home with little trouble. Having a credit card is a very valuable tool but should always be used responsibly! Overcharging on credit cards is the number one cause of consumer debt. When you plan to make these charges make sure you plan to make the payments first.

Harris Smith is a writer on personal finance education. Her article tackles the pros and cons of home equity line of credit . If tired and frustrated of being in debt, then our instant online home equity line of credit solution is the perfect answer to your problems.

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