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Standard. SSEPF4 – The student will evaluate the costs and benefits of using a credit card. SSEPF4a- List factors that affect credit worthiness. Credit. Credit is the ability to obtain goods or services before paying them, based on a promise to pay later.

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  1. Standard • SSEPF4 – The student will evaluate the costs and benefits of using a credit card. • SSEPF4a- List factors that affect credit worthiness.

  2. Credit • Credit is the ability to obtain goods or services before paying them, based on a promise to pay later. • Each time a person uses credit he or she is in effect borrowing money.

  3. Revolving Credit • It is credit that is available up to a limit and automatically renewed when debts are paid off or down.

  4. The 3 C’s of Credit Worthiness

  5. Other Factors that affect Credit Worthiness • Payment on time • How much credit are you using • How many people have looked at your credit

  6. Benefits of good credit • Low interest rates meaning lower payments • Easy to get loans and more credit

  7. Causes of problems

  8. What is the first step in choosing a credit card? • Determine how it will be used • Emergencies • Purchases • Bill paying • Gas

  9. Notes- Credit Knowledge SSEPF4 – The student will evaluate the costs and benefits of using a credit card.

  10. What about APR? • APR is the Annual Percentage Rate. • The cost of credit (finance charge) expressed as a yearly percentage. • Credit Cards can have many different APR’s. • Purchases • Cash Advances • Balance transfers • Late Payments or Introductory Rates

  11. Fixed vs. Variable APR • Fixed APR’s do not change with out notice from the credit company • Variable APR’s can change at specified times according to your contract (usually every 6 months).

  12. Credit Limit • The maximum total amount the user may charge on the card.

  13. Common Incentives • Rebates • Frequent Flyer Miles • Additional Warranty coverage • Car rental insurance • Travel accident insurance • Rewards points

  14. Common Fees Credit Cards Charge • Annual fee – Charged for having the card • Cash-advance fee – when the user gets cash from on ATM • Balance transfer fee – when the user moves a balance from another credit card

  15. More Fees….. • Late payment fee – charged when payment is received after the due date. • Over-the-credit limit fee – when the user goes over their credit limit. • Credit-limit increase fee – when a user asks for an increase in the credit limit.

  16. And even more fees….. • Set up fee – charged when a new account is opened • Return item fee – when the user’s payment check bounces. • Other fees • Paying by phone • Talking to a customer service person • Reporting to credit bureau’s

  17. Credit Card Companies must disclose: • APR’s for purchases • Other APR’s • Variable rate information • Grace period for repayment of balances • Method of computing the balance for purchases • Annual fees • Minimum finance charge • Transaction fee for cash advances • Balance-transfer fees • Late-payment fees • Over-the-credit-limit fees

  18. Consider this situation • It is midnight and your car breaks down. You are far away from home. You use your cell phone to call an auto-repair service. The service representative says that a service visit will cost $50, plus the cost of any parts or labor that are necessary to get you driving again. All you have is $7 in your pocket (you have no debit card). Should you use a credit card? Explain your answer.

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