Evaluating Credit card offers - Boston CollegeUNDERGRADUATE CREDIT CARD USAGE What is the most...
Transcript of Evaluating Credit card offers - Boston CollegeUNDERGRADUATE CREDIT CARD USAGE What is the most...
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$uccessful Start and the Office of Student Services Present:
EVALUATING CREDIT CARD OFFERS
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SESSION OBJECTIVES
Discuss the importance of credit and credit management
Identify how to establish new credit and evaluate credit card offers
Discuss how to correct errors on your credit card statements
Identify the real cost of credit card borrowing
Identify the five sections of a credit report and how to obtain one
Identify the five components of your credit score
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POP QUIZ!
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UNDERGRADUATE CREDIT CARD USAGE
What percentage of undergraduates in 2004
began the school year with credit cards?
a. 22%
b. 36%
c. 59%
d. 76%
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UNDERGRADUATE CREDIT CARD USAGE
What percentage of undergraduates in 2004
began the school year with credit cards?
a. 22%
b. 36%
c. 59%
d. 76%
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UNDERGRADUATE CREDIT CARD USAGE
What is the average outstanding balance on
undergraduate credit cards?
a. $2,169
b. $3,334
c. $5,088
d. $6,124
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UNDERGRADUATE CREDIT CARD USAGE
What is the average outstanding balance on
undergraduate credit cards?
a. $2,169
b. $3,334
c. $5,088
d. $6,124
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UNDERGRADUATE CREDIT CARD USAGE
What is the most reported use of credit cards?
a. Clothing
b. School supplies (paper, notebooks, etc.)
c. Textbooks
d. Food
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UNDERGRADUATE CREDIT CARD USAGE
What is the most reported use of credit cards?
a. Clothing
b. School supplies (paper, notebooks, etc.)
c. Textbooks
d. Food
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UNDERGRADUATE CREDIT CARD USAGE
What percentage of undergraduates pay off
their credit card balances in full each month?
a. 8%
b. 21%
c. 41%
d. 56%
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UNDERGRADUATE CREDIT CARD USAGE
What percentage of undergraduates pay off
their credit card balances in full each month?
a. 8%
b. 21%
c. 41%
d. 56%
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GRADUATE CREDIT CARD USAGE
What percentage of graduate students in 2006
have at least one credit card?
a. 22%
b. 48%
c. 76%
d. 92%
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GRADUATE CREDIT CARD USAGE
What percentage of graduate students in 2006
have at least one credit card?
a. 22%
b. 48%
c. 76%
d. 92%
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GRADUATE CREDIT CARD USAGE
What is the average outstanding balance on
graduate credit cards?
a. $2,011
b. $4,567
c. $7,831
d. $8,612
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GRADUATE CREDIT CARD USAGE
What is the average outstanding balance on
graduate credit cards?
a. $2,011
b. $4,567
c. $7,831
d. $8,612
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GRADUATE CREDIT CARD USAGE
What percentage of graduate students pay off
their credit card balances in full each month?
a. 12%
b. 20%
c. 35%
d. 41%
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GRADUATE CREDIT CARD USAGE
What percentage of graduate students pay off
their credit card balances in full each month?
a. 12%
b. 20%
c. 35%
d. 41%
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EVALUATING CREDIT CARD OFFERS
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WHAT CAN YOU DO?
Without a good credit history, it’s hard to get
new credit. But without credit, it’s tough to
build a good credit history.
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ESTABLISHING NEW CREDIT
Open checking and savings accounts
Obtain your credit report – resolve mistakes
and add positive information
Apply for gasoline or department store credit
cards
Take out small personal loan from local bank
Apply for a secure credit card
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EVALUATING CREDIT CARD OFFERS
Interest Rate (APR)
Grace Period
Finance Charges
Annual Fee
Cash Advance Fees
Late-Payment Charges
Over-Limit Fees
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INTEREST RATES
Common types of APRs:
Fixed – credit card company will notify you of any
interest rate changes
Variable – typically based on an index
Tiered – outstanding balance is charged at
different rates for different levels
** Periodic rate is used to calculate finance charges
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GRACE PERIOD
Time during which the use of the issuer’s
money is interest-free
Grace period is often 25 days but some
companies have reduced it to 20 days
Shorter grace period can mean that you will
accumulate interest charges by the time you
receive your bill
Choose longer grace periods for bills that are paid
in full each month
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FINANCE CHARGES
Credit card issuers calculate outstanding
balance in different ways:
Average daily balance method, including or
excluding new purchases
Two-cycle average daily balance method, including
or excluding new purchases
Adjusted balance method
Previous balance method
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CASH ADVANCE FEES
Most credit card issuers charge a fee for a cash
advances (generally 2 – 4%)
Cash advances can also be assessed a higher
interest rate
Cash advances may not have a grace period
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LATE FEES
Late fees are assessed when payments arrive late (generally $15 to $50)
Multiple late fees in a specific time period can trigger a credit card issuer to assess a penalty interest rate on some accounts
Credit card issuers can check client’s credit report for late fees assessed on other credit accounts and use that information as a reason to raise the interest rate on their credit card
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OVER-LIMIT FEES
Fee assessed when card over specified credit
limit (not necessarily a one-time fee)
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TOO MANY CREDIT CARD OFFERS?
You can remove your name from the marketing
lists of the three credit reporting bureaus:
call 888- 5 OPTOUT, or
go online to www.optoutprescreen.com
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CORRECTING ERRORS ON YOUR CREDIT CARD
STATEMENT
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ERRORS ON YOUR CREDIT CARD STATEMENT
Avoid errors and unjust fees
Review statement carefully monthly
Ensure all charge are yours and that any fees
are justified
Contact issuer immediately with any problems
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FAIR CREDIT BILLING ACT
Applies to credit cards, charge accounts and
overdraft checking - does not apply to checks or
debit cards
Protects consumers against billing errors,
unauthorized use of account, and unauthorized
charges
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RESOLVING STATEMENT ERRORS
Write issuer within 90 days of bill with disputed
charge(s)
Letter must include your name and account
number, date and amount of disputed charge,
complete explanation of disputed charge
Send letter to address included in your bill, NOT
payment address
Consider certified mail with return receipt
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WHAT HAPPENS NEXT?
Creditor must acknowledge letter in writing
within 30 days
Creditor must investigate within 90 days
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DURING INVESTIGATION
Consumer is not required to pay disputed
charges
Issuer is not permitted to take action to collect,
report as delinquent, or restrict account in any
way
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RESULTS OF INVESTIGATION
If error is found:
Consumer’s account will be credited and late fees
or finance charges reversed
If disputed charges are correct:
Consumer must be told in writing what is owed and
why
Consumer will owe disputed amount AND related
fees
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FOR FURTHER ASSISTANCE…
National Consumer Law Center
www.consumerlaw.org
US Citizens for Fair Credit Card Terms
www.cardratings.org
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THE REAL COST OF CREDIT CARD BORROWING
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TRUE COST OF YOUR CREDIT CARDS
Select frequently used credit cards.
Review year of statements and add up the
following:
annual fees
late fees
finance charges
***The fees can add up quickly!
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CREDIT CARD EXAMPLE 1
Charge: $500.00
Interest : 14.99%
1st Minimum Payment Due: $12.50
2nd Minimum Payment Due: $12.30
At this payment rate, how long will it take to pay
the balance?
How much interest was paid?
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CREDIT CARD EXAMPLE 1
Charge: $500.00
Interest : 14.99%
1st Minimum Payment Due: $12.50
2nd Minimum Payment Due: $12.30
At this payment rate, how long will it take to pay
the balance? 56 months (4.7 years)
How much interest was paid? $200.00 or 40%
of initial loan amount
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CREDIT CARD EXAMPLE 2
Charge: $1,000.00
Interest: 17.99%
Minimum Payment: $20.00
At this payment rate, how long will it take to pay
the balance?
How much interest was paid?
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CREDIT CARD EXAMPLE 2
Charge: $1,000.00
Interest: 17.99%
Minimum Payment: $20.00
At this payment rate, how long will it take to pay
the balance? 93 months (7.75 years)
How much interest was paid? $861.02 or 86%
of the initial loan amount
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CREDIT CARD EXAMPLE 2B
Charge: $1,000.00
Interest: 17.99%
Minimum Payment: $20.00
Monthly Payments Made: $25.00
At this payment rate, how long will it take to pay
the balance? 62 months (5.16 years)
How much interest was paid? $538.07 or 54%
of the initial loan amount
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CREDIT REPORTS
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CREDIT REPORT FACTS
Record of your credit payment history
Illustrates the amount you have borrowed in
credit cards and loans and your timeliness of
payment
Contains identifying information
Used to determine creditworthiness
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ANATOMY OF A CREDIT REPORT
Section 1: Personal Identification Information
Section 2: Public Record Information
Section 3: Collection Agency Account
Information
Section 4: Credit Account Information
Section 5: Companies Requesting your Credit
File
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HOW TO OBTAIN A CREDIT REPORT
Credit Agencies:
Equifax: www.equifax.com
Experian: www.experian.com
Trans Union: www.transunion.com
One free report from each agency every 12
months: www.annualcreditreport.com
** do not use www.freecreditreport.com ***
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CREDIT SCORES
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CREDIT SCORE
Reflection of the information on your credit
report
Formula developed by Fair and Isaac
Corporation (FICO)
Scores range from 300-850
Average score is 720
The lower the score, the greater the risk it is to
lend you money
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NATIONAL DISTRIBUTION OF FICO SCORES
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CREDIT SCORE FACTORS
35% Payment History
30% Amount Owed vs. Available Credit
15% Length of Credit History
10% Amount of New Credit
10% Types of Credit
0% Number of Inquiries
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QUESTIONS?
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