Why Do I Need Credit?
Credit plays a crucial role in your financial life serving as a gateway to opportunities and financial stability. It helps you manage expenses from everyday purchases to significant investments while building a solid financial reputation. Good credit opens doors to better loan rates, insurance premiums, and rental opportunities. It’s not just about borrowing money—it’s about creating a foundation for a secure and flexible financial future.
Benefits of having a credit card
- Helps Build Credit - When used responsibly, credit cards are the easiest way to build credit.
- Allows Flexibility - Credit cards allow you to pay for important things like tuition, and pay it down on your own timeline.
- Fraud Prevention and Security - Using a credit card is a safer way to pay than a debit card, checks, or cash. If fraud does occur on your credit card, it is limited to your credit limit amount. In addition, these transactions are easily refunded keeping your own money safe.
- Rewards - Earn cash back, travel reimbursement, or gift cards by using a rewards credit card to pay for necessities like bills, groceries, or tuition.
Q: What is an APR?
A: The APR (Annual Percentage Rate) determines the interest on your revolving balance. It can be fixed (does not change throughout the term of the loan) or variable (may change during the term based on Prime Rate). If you don’t pay off the full balance monthly, you'll incur interest on the remaining amount.
Q: When is my payment due?
A: The lender sets the due date. You must make at least the minimum payment by this date each month. If you carry a balance, interest will accrue, increasing what you owe.
Q: Are there annual fees?
A: Some lenders charge annual fees for their credit cards, regardless of usage. USU Credit Union does not charge annual fees on consumer credit cards.
Q: What is my credit limit?
A: The credit limit is the maximum balance set by the lender at approval. It may increase over time with good credit history.
Examples of Credit Usage
- Loan Approval and Interest Rates – Lenders review your credit report and score when you apply for a loan. Your credit score affects loan approval and the interest rate you’ll pay.
- Insurance Rates – A good credit score can lower your auto insurance costs, which are required by law. While many young people stay on a parent's policy, it's wise to prepare for your own insurance.
- Renting an Apartment – Some landlords check credit before approving rental applications. Having no credit history can disadvantage you compared to other applicants.
