Credit Cards 101. What are Credit Cards? Pre-approved credit which can be used for the purchase of...
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Transcript of Credit Cards 101. What are Credit Cards? Pre-approved credit which can be used for the purchase of...
![Page 1: Credit Cards 101. What are Credit Cards? Pre-approved credit which can be used for the purchase of items now and payment of them later.](https://reader030.fdocuments.in/reader030/viewer/2022033101/56649e955503460f94b99c1c/html5/thumbnails/1.jpg)
Credit Cards 101
![Page 2: Credit Cards 101. What are Credit Cards? Pre-approved credit which can be used for the purchase of items now and payment of them later.](https://reader030.fdocuments.in/reader030/viewer/2022033101/56649e955503460f94b99c1c/html5/thumbnails/2.jpg)
What are Credit Cards?
Pre-approved credit which can be used for the purchase of items now and
payment of them later.
![Page 3: Credit Cards 101. What are Credit Cards? Pre-approved credit which can be used for the purchase of items now and payment of them later.](https://reader030.fdocuments.in/reader030/viewer/2022033101/56649e955503460f94b99c1c/html5/thumbnails/3.jpg)
Are Debit Cards a type ofCredit Card?
NO!
Debit=Credit
Debit cards allow payment and purchase
to happen simultaneously
Debit Cards are:$ Not the same as
credit cards$ Not a form of
credit at all$ Directly linked to
your bank account.
![Page 4: Credit Cards 101. What are Credit Cards? Pre-approved credit which can be used for the purchase of items now and payment of them later.](https://reader030.fdocuments.in/reader030/viewer/2022033101/56649e955503460f94b99c1c/html5/thumbnails/4.jpg)
Why Use a Credit Card?
$ Proper use can help establish good credit rating
$ Conveniently accepted across United States and abroad
$ Emergency buying power$ Additional form of identification$ Record of purchases on bill statement$ Often required to hold a reservation
![Page 5: Credit Cards 101. What are Credit Cards? Pre-approved credit which can be used for the purchase of items now and payment of them later.](https://reader030.fdocuments.in/reader030/viewer/2022033101/56649e955503460f94b99c1c/html5/thumbnails/5.jpg)
Why Not Use a Credit Card?
$ Improper use can damage credit rating$ Higher risk for impulsive buying and overspending$ Debt trap when used unwisely$ Expensive way to borrow due to high interest
rates$ Less to spend in the future due to paying off
purchases from past$ Possible hidden fees & surcharges$ Privacy is an increasing concern$ Identity theft easier
![Page 6: Credit Cards 101. What are Credit Cards? Pre-approved credit which can be used for the purchase of items now and payment of them later.](https://reader030.fdocuments.in/reader030/viewer/2022033101/56649e955503460f94b99c1c/html5/thumbnails/6.jpg)
Types of Credit Cards
Cards where purchases can be made in many Cards where purchases can be made in many locationslocations
$ Bank Credit Cards¢ Card issued by financial institution¢ Credit is issued by service provider (Wells Fargo Visa
card) ¢ Balance paid-off at end of month or extended over period
of time
$ Travel and Entertainment Credit Cards¢ Credit and card issued by service provider (Diner’s Club)¢ Not accepted at as many locations as bank cards¢ Entire balance must be repaid in 30 days
![Page 7: Credit Cards 101. What are Credit Cards? Pre-approved credit which can be used for the purchase of items now and payment of them later.](https://reader030.fdocuments.in/reader030/viewer/2022033101/56649e955503460f94b99c1c/html5/thumbnails/7.jpg)
Types of Credit Cards
Cards where purchases are made in Cards where purchases are made in particular locationparticular location
$ Retail Credit Cards¢ Credit and card issued by particular retailer (Old
Navy, The Bon, Home Depot, Shell Oil)¢ Balance paid-off at end of month or extended over
period of time
![Page 8: Credit Cards 101. What are Credit Cards? Pre-approved credit which can be used for the purchase of items now and payment of them later.](https://reader030.fdocuments.in/reader030/viewer/2022033101/56649e955503460f94b99c1c/html5/thumbnails/8.jpg)
Obtaining a Credit Card
$ Comparison shop when choosing the right card
$ Know the facts¢ Terms and conditions of credit card
accounts differ¢ Be aware of “hidden” costs of card(s)
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$ Annual Percentage Rate (APR): interest rate charged for amount borrowed in terms of percentage per year
$ Grace Period: amount of time allowed before finance charges (interest or cost of credit) are applied
Annual
Percentage Rate for
Purchases
Grace Period
for Purchase
s
Minimum Finance Charges
Balance
Calculation
Method for
Purchases
Annual
FeesTransaction Fees for Cash Advances
Late
Payment Fees
19.9%
Not less than
25 days
$.50 when a finance charge at a periodic
rate is charged
Average daily
balance method
(including new
purchases)
$20 per year
2% with a minimum fee of $3
$29
Credit Card Terms Explained
![Page 10: Credit Cards 101. What are Credit Cards? Pre-approved credit which can be used for the purchase of items now and payment of them later.](https://reader030.fdocuments.in/reader030/viewer/2022033101/56649e955503460f94b99c1c/html5/thumbnails/10.jpg)
$ Minimum Finance Charge: minimum amount charged for card use
$ Balance Calculation Method: method used to determine balance including finance charges
Annual
Percentage Rate for
Purchases
Grace Period
for Purchase
s
Minimum Finance Charges
Balance
Calculation
Method for
Purchases
Annual
FeesTransaction Fees for Cash Advances
Late
Payment Fees
19.9%
Not less than
25 days
$.50 when a finance
charge at a periodic
rate is charged
Average daily
balance method
(including new
purchases)
$20 per year
2% with a minimum fee of $3
$29
Credit Card Terms Explained
![Page 11: Credit Cards 101. What are Credit Cards? Pre-approved credit which can be used for the purchase of items now and payment of them later.](https://reader030.fdocuments.in/reader030/viewer/2022033101/56649e955503460f94b99c1c/html5/thumbnails/11.jpg)
Balance Calculation Methods
Creditors use a number of ways to determine Creditors use a number of ways to determine howhow
interest, often called finance charges, interest, often called finance charges, accumulateaccumulate
$ Average Daily Balance Method (including new purchases witha grace period)¢ If the balance is not zero, interest is applied to new purchases
when they are made, if balance is zero, a grace period is allowed before interest is charged
$ Average Daily Balance Method (including new purchases withno grace period)¢ Regardless of the previous month’s balance, interest is applied
to new purchases as they are made
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Balance Calculation Methods (continued)
$ Previous Balance Method¢ Interest is only paid on the previous balance, not on
purchasesmade since the last payment
$ Two-cycle Average Daily Balance (including new purchases)¢ This method should be avoided by consumers! ¢ The interest is paid on the current balance as well as
the previous month’s balance, this leads to double finance charges
¢ A zero-balance must be held for two months in order to avoidcharges
![Page 13: Credit Cards 101. What are Credit Cards? Pre-approved credit which can be used for the purchase of items now and payment of them later.](https://reader030.fdocuments.in/reader030/viewer/2022033101/56649e955503460f94b99c1c/html5/thumbnails/13.jpg)
$ Annual Fees: yearly charge for credit card ownership
$ Cash Advance Transaction Fees: cash withdrawal fees
$ Late Payment Fees: penalty fee for payments not made by the due date
Annual
Percentage Rate for
Purchases
Grace Period
for Purchase
s
Minimum Finance Charges
Balance
Calculation
Method for
Purchases
Annual
FeesTransaction Fees for Cash Advances
Late
Payment Fees
19.9%
Not less than
25 days
$.50 when a finance charge at a periodic
rate is charged
Average daily
balance method
(including new
purchases)
$20 per year
2% with a
minimum fee of $3
$29
Credit Card Terms Explained
![Page 14: Credit Cards 101. What are Credit Cards? Pre-approved credit which can be used for the purchase of items now and payment of them later.](https://reader030.fdocuments.in/reader030/viewer/2022033101/56649e955503460f94b99c1c/html5/thumbnails/14.jpg)
Opening a Credit Account
1. Applicant completes a credit application2. Lender conducts a credit investigation3. Applicant is given a credit rating4. Lender accepts or denies the credit request5. If accepted, applicant evaluates the credit
card details6. Applicant accepts or refuses credit terms
![Page 15: Credit Cards 101. What are Credit Cards? Pre-approved credit which can be used for the purchase of items now and payment of them later.](https://reader030.fdocuments.in/reader030/viewer/2022033101/56649e955503460f94b99c1c/html5/thumbnails/15.jpg)
Understanding the Bill
$ Minimum Payment Due: 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
$ Past Due Amount: the previous amount due which was not paid before the due date
$ Due Date: the day by which the company requires a payment to be made
$ New Balance: the total amount owed on a credit card
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Understanding the Bill (continued)
$ Credit Line: the maximum amount of charges allowed to an account
$ Closing Date: last day for transactions to be reported on the statement
$ Charges, Payments, and Credits: the transactions which occur with the use of a credit card
$ Finance Charge: charges assessed for credit card use
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Handling Disputes
Two Types of Disputes: 1. In the case of any
unauthorized use of your card…¢ Liability Limited to
$50¢ Must Notify Company
ASAP¢ Phone AND Written
Notice Required
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Handling Disputes (continued)
2. In the case of a billing error…¢ Notify Company Within
60 Days¢ Letter must include
+Name+Account+Dollar Amount Involved+Reason for Dispute+Any Other Clarifying
Information
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Using a Credit Card Properly
$ Only use when there is no doubt about ability to pay-off the charges at the end of the billing cycle
$ Record all expenses and keep receipts $ Check credit statement for errors $ Always pay off balance completely and
timely
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Sign card with signatureDo not leave cards lying aroundClose unused accounts in writing
and by phone, then cut up the cardDo not give out account number
unless making purchasesKeep a list of all cards, account
numbers, and phone numbers separate from cards
Report lost or stolen cards promptly
Safety Tips