‘Credit’ means ‘buy (or borrow) now and pay later’. Credit is nearly always a service you pay for, so you pay back the amount borrowed plus a percentage on top. You usually pay it back in instalments over a period of time. You cannot normally take on any kind of credit before you are 18. No company will lend you money without believing they will get it back from you – for example because you have a regular income, or you have a history of paying money back on time. After all, this is their business. Credit comes in several forms:

• Hire purchase (HP) and credit sales: you pay a deposit and then make weekly/monthly payments. With hire purchase, the goods do not belong to you until you have made the last payment, whereas with credit sales you are the owner of the goods as soon as the contract is made. It is often easier to get something on HP, but it will usually be more expensive this way.
• Bank loans: banks offer personal loans, and budget accounts to spread the payment of bills over a year.
• Overdrafts: many bank accounts allow you to withdraw money even when your account has nothing in it. If you have not agreed this with them you will be charged more than if you have agreed it. Charges vary between banks; some offer interest free overdrafts.
• Credit cards and store cards – allow you to buy goods on borrowed money – but if you do not pay off what you owe within a month or so you will have to pay interest – usually quite high. Store cards can only be used in certain stores, and the interest is usually higher than with a credit card.
• Internet / pay day loans – are short term loans where you pay back a lot more than you borrow. If you miss payments this can quickly get you into a lot of debt. See also here about ‘continuous payment authority’. Pay day loans are legal, but see also illegal money lending.

South Yorkshire Credit Union is a savings and loans service for anyone living, working or volunteering in York (as well as other areas). You can open a savings account at any age and can apply for a loan from age 18. The cost of a loan is much lower than from high street and online lenders (‘payday loan’ companies) and they will not lend you money if making the repayments will cause you further hardship. They also offer pre-paid card options too. It costs £5 to join.