Presentation Transcript

1. Credit Cards

   The Essentials to Take Charge of Your Finances 7.4.2 In your opinion, do consumers spend more per month on average when they use a credit card or cash?
2. Credit When a bank loans money to a person and trusts that it will be paid back Line of Credit Max dollar amount that can be borrowed
3. Credit vs. Debit cards
4. How do you obtain credit? 5 C’s of Credit worthiness Character- person’s honesty and reliability determined by their history of repaying bills on time Capital- evaluation of a person’s net worth Capacity-income a person has available to repay loan determined by job longevity and having few other loans Collateral- property which can be seized if loan not repaid Conditions- general state of the economy
5. Types of Credit
6. Why use a credit card? What are advantages to using a credit card? Advantages Convenient Useful for emergencies Often required to hold a reservation Purchase ‘big ticket’ items earlier Easy form of debt consolidation Protection against rip-offs and fraud Establish a good credit rating
7. Why use a credit card? What are disadvantages to using a credit card? Disadvantages Interest is costly Additional fees are common Tempting to overspend Privacy is an increasing concern Personally responsible for lost/stolen cards Identity theft easier Can lose financial freedom from overspending
8. Interest The price of borrowing money to make a purchase and paying it later Interest is referred to as the annual percentage rate (APR) Credit is often compounding interest which is interest added upon interest each month based upon the amount charged The interest rate varies greatly between credit cards
9. Interest
10. Schumer box A display with the costs of a credit card in an easy to read box format on most applications and solicitations Required by The Federal Truth in Lending Act
11. Annual percentage rate Annual percentage rate (APR) – Interest rate charged for amount borrowed in terms of per dollar per year The lower the interest rate, the better
12. Grace period Grace Period – Amount of time allowed before finance charges are applied
13. Minimum finance charge Minimum finance charge – Minimum amount charged for card use
14. Balance calculation method Balance calculation method for purchases- Method used to determine balance for finance charges
15. Annual fees Annual fees- Yearly charge for credit card ownership
16. Cash advances Transaction fees for cash advances – cash withdrawal fees
17. Late payment fees Late payment fees – Penalty fee for payments not made by the due date
18. Additional benefits What would you be willing to do for additional benefits on your credit card? Pay a higher annual fee? Pay a higher interest rate? Additional benefits of a credit card may include the following: Rebates (money back) Products or services given to the consumer Frequent flyer miles Additional warranties Travel accident insurance Credit card registration A low introductory APR
19. Receiving a credit card
20. Assignment-Take home Credit Card Interviews- Yellow Handout Choose three adults (over 21) Write first name and age Ask the following questions How many credit cards do you have? How many do you actually use? When did you get your first credit card? Why do you have a credit card? Do you pay off your cards each month? What do you believe is the biggest advantage to a credit card? What do you believe is the biggest disadvantage to a credit card?
21. Understanding the bill Closing date Charges, payments, and credits – The transactions which occur with the use of a credit card Important to keep receipts to compare them to the bill for accuracy Closing date – Last day for transactions to be reported on the statement Charges, payments, and credits
22. Understanding the bill Finance charge – Charges assessed for credit card use Minimum payment due – The minimum amount to be paid If this amount is paid and a balance is left on the account, additional finance charges will be included in the following month’s balance Minimum payment due Finance charges
23. Understanding the bill Due date Due date – The day by which the company requires a payment to be made Past due amount – The required amount not paid before the due date
24. Understanding the bill New balance New balance – The total amount owed on a credit card Credit Line – The maximum amount of charges allowed to an account Credit line
25. Understanding the bill Over the limit fee – credit card companies will charge consumers a fee if they charge over their limit within one month Over the limit fee
26. Safety tips Sign card with a signature and “Please See ID” Do not leave cards lying around Close unused accounts in writing and by phone, then cut up the card Do not give out account numbers unless making purchases Keep a list of all cards, account numbers, and phone lists separate from cards Report lost or stolen cards promptly
27. Fair Credit Billing Act Helps to protect consumers while using a credit card to make purchases It allows the consumer to not pay for a product or service for which the consumer has a complaint Billing disputes are covered within the Fair Credit Billing Act for credit cards If products are not delivered or if it is not what they consumer requested, any amount of money that was credited to the card above the $50.00 fee that consumers are responsible for will be issued back Debit cards do not have the same protection Making credit cards a safer form of payment for online purchases
28. Any questions?