Article and image courtesy of North American Precis Syndicate (NAPSI)
Money can be a stressor for many, but you don’t have to be among them. Creating a game plan and understanding these key terms can help improve your financial health.
Credit Score
A credit score is a three-digit number that represents your general creditworthiness, calculated based on your personal financial history. Lenders use this number to assess your ability to repay a loan, establish your credit line and to determine your interest rate. A good credit score can help you save money on loans, credit cards and insurance, and can also make it easier to rent an apartment, buy a car or purchase a home.
Credit Cards: General Purpose vs. Store Cards
Credit cards have become an indispensable part of financial life, with 82% of American adults owning at least one credit card – the average U.S. consumer has three to four credit cards.
But credit cards are not all the same. General-purpose credit cards work at most locations in the world where credit is accepted and often come with rewards, promotional financing, or introductory offers.
Store credit cards can be used only at one specific store, or a group of stores, such as a furniture or department store. These cards are often available to those who have a lower credit score, or limited or no credit history. Store cards traditionally have lower credit limits, given you can only use them with that specific retailer.
Consumer financial services company Synchrony (www.synchrony.com) has partnerships with retailers offering store credit cards. “Our cards offer consumers financing with top brands to bring them more choices, flexibility and convenience,” said Max Axler, chief credit officer at Synchrony. “Store credit cards are a powerful option to take advantage of special offers, promotional financing and perks while shopping at your favorite retailers.”
Related: 6 Financial Tips to Help Prepare for the Unexpected
Interest Rates
A credit card’s interest rate is the amount you will be charged on unpaid credit card balance that is due. The interest rate is calculated as a percentage of the outstanding balance. For example, if you charge $1,000 on a credit card that does not have any outstanding balance and pay it off before the monthly due date, you typically won’t incur any interest charge. You’d simply pay $1,000, and the balance would be satisfied. However, if you do not pay it all off, or pay any amount that was less than the full $1,000, you will be charged interest based on your average daily balance.
Annual Percentage Rate (APR)
The yearly interest rate charged on your balance due is called the Annual Percentage Rate. You pay this interest rate on any balances not paid in full each month. If you don’t pay your bill in full when it is due every month, the amount you do not pay is subject to interest. It is important to note that your credit card may have more than one APR: One rate for purchases, another for balance transfers and yet another for cash advances.
