THE BASICS OF CREDIT

1. THE BASICS OF CREDIT • TYPES OF CREDIT • SECURED CREDIT (Mortgage or Car Loan) • In This Type of credit, you make a large purchase like a car or a home and the lender owns the item until you have paid it in full in including interest • If you fail to make the payments the item will be seized by the lender or a representative

2. THE BASICS OF CREDIT • UNSECURED CREDIT(credit cards) • In this type of credit, a credit card company agrees to let you charge items to an account • You agree that you will pay back the initial purchase price, plus interest • The interest is based on the time required to pay the funds back • Unsecured credit charges higher rates of interest than secured credit • http://www.youtube.com/watch?v=83wtyEqD1fc

3. THE BASICS OF CREDIT • PRIVATE LOANS • These are unregulated loans from friends or family • In these situations the repayment options can be formal or informal and the amounts of interest can vary dramatically • These loans are often used for items traditional creditors would not finance

4. THE BASICS OF CREDIT • THINGS YOU NEED TO KNOW • Items that are considered when you apply for a loan include • Wages you earn • How long you have been employed • Spouse’s income and credit history • Current monthly bills • Item you are attempting to finance • Past borrowing history

5. THE BASICS OF CREDIT • INTEREST RATES VARY • Items that cause interest rates to vary • History with the lending institution • Loan term • Type of spending with borrowed money • Choice of a floating rate

6. THE BASICS OF CREDIT • SOME TERMS YOU SHOULD KNOW • CO SIGNER • A person who will guarantee to pay back the money you have borrowed under the agreed to conditions should you default on your loan • FINANCE CHARGES • The total amount one will pay in addition to the purchase price, when using credit. It includes interest charges, service charges and sometimes insurance

7. THE BASICS OF CREDIThttp://www.youtube.com/watch?v=2JwdIWjVHaU&feature=relatedc • SOME TERMS YOU SHOULD KNOW • OPPORTUNITY COST • The loss of the next best alternative when scarce resources are used for one thing instead of another • ANNUAL PRECENTAGE RATE (APR) • The rate of interest you will be charged stated as a yearly rate. Lenders must tell borrowers the APR

8. THE BASICS OF CREDIT • ADVANTGES OF CREDIT • Convenient • Provides detailed accurate records • Safer than cash • Permits buying sale items when cash is not available • Permits using items while paying

9. THE BASICS OF CREDIT • DISADVANTGES OF CREDIT • Makes it easier to overspend and exceed a budget • Has the opportunity of cost of reduced future spending • Often requires additional costs in interest and service charges • Requires the approval of a creditor • If abused may not have the opportunity to borrow in the future http://www.youtube.com/watch?v=SQQOXZFP0mM&feature=related

10. THE CREDIT CARD INDUSTRY: ADVANCED • Credit Card Trick #1: Partial Payment • When you use your credit card, you're borrowing money. If you pay it back in full, on time, every month -- there’s no interest. • But if you pay just part of your balance – you’ll owe interest on your total monthly bill. It’s called “Partial Payment” and it is in your cardholder’s agreement, in some form.

11. THE CREDIT CARD INDUSTRY: ADVANCED • Credit Card Trick #2: Currency Conversion Fee • The fee is applied to foreign purchases – including those made online. It's often rolled into the currency exchange rate, which means you likely won’t see it appear as an individual charge on your bill. • You will be charged a fee every time you buy anything in foreign dollars – on top of the exchange rate. And you’ll be charged again if you return the item

12. THE CREDIT CARD INDUSTRY: ADVANCED • Credit Card Trick #3: Interest Rate Increases • A credit card company can step up your rate at their discretion. If you miss a couple of payments, your rate can rise as much as five per cent. • Companies have the right to increase your interest rate at any time. • There is a ceiling though: we can only raise your rate by a maximum of 60 per cent.

13. THE CREDIT CARD INDUSTRY: ADVANCED • Credit Card Trick #4: Due Date Issues • You make your payment on the internet on the due date and assume no interest charges • But in the fine print of its cardholder’s agreement, companies warn that it could take three to five days to process a payment.

14. THE CREDIT CARD INDUSTRY:THE STATS • THE CANADIAN REALITY • Statistics Canada data show that household debt rose to 164.6 per cent of disposable income in 2012, meaning Canadians owe about $1.65 for every $1 they earn in income • The average Canadian's debt load grew to $26,768, up 4.6 per cent year-over year in the third quarter • Canadian average credit card debt was down one per cent year-over-year at an average of $3,573. • Canadian credit card debt totalled $73.7 billion in November 2012, down 4.6 per cent from the same month of 2011

15. THE CREDIT CARD INDUSTRY:THE STATS • THE CANADIAN REALITY • Hundreds of institutions in Canada, including banks, credit unions, retailers, trust companies and finance companies offer credit card products. • 76.3 million Visa and MasterCard cards are in circulation in Canada. Was 50.4 million in 2003 • There are many low-rate cards on the market and over 30 of those cards have an interest rate of under 13%.

16. THE CREDIT CARD INDUSTRY:THE STATS • THE CANADIAN REALITY • Range in interest rates offered by bank-issued credit cards: 9.90% - 19.90% • Range in annual fees charged by bank-issued credit cards: $0 - $234 • IKEA Credit Card charges 29.99 per cent. • Future Shop Card and HBC Credit Card charge 29.9 per cent. • Home Depot, Lowe's and Staples Credit Cards charge 28.8 per cent. • Sears Card charges 19.99 per cent.