Credit Cards mortgages, auto loans: Manage your credit

Youcan become financially empowered by getting and maintaining good credit.

If you take out a loan at a bank or credit union, they will usually charge you interest until you pay the full loan. Your credit score plays a large role in determining the interest rate you are given, but different institutions offer different rates, so it is important to shop around. The amount you are charged is called the annual percentage rate (APR).

Simple interest applies only to the principal balance, the amount you borrowed. Compound interest includes interest on the principal loan and on the interest from the last payment. As interest increases, so does the amount added to your balance.

Most credit cards do not charge you interest if you pay the full amount you owe by the due date. Interest is applied only to the amount that remains after the due date. If you miss a minimum payment, you are usually charged a fine.

Most auto, student, mortgage, and large personal loans include interest automatically in the monthly payments. You then pay a portion of the interest on the principal and a portion on the interest accrued each month as part of your set monthly payments.

Timing is a significant factor when taking out a loan. The current 30-year fixed mortgage rate is 6.15%, up from 2.86% in September 2021. Check the rate at Freddie Mac. https://www.freddiemac.com/pmms

Check credit card rates at Federal Reserve. https:// www.federalreserve.gov/releases/g19/current/

To keep your credit under control, always pay your monthly bill on time, or pay it off entirely if you can. Pay your mortgage and car loans on time. Avoid cash advances because they begin accruing high interest right away.

Improve your credit score by opening accounts that report to the credit bureaus, maintaining low balances, and paying your bills on time. Don’t use credit for everyday purchases if you don’t already have the money to cover it.