An educational partnership between Consumer Action and American Express

1
Credit Cards

• What You Need To
• KNOW

2
Welcome

• Ken McEldowney, Consumer Action
• Executive Director
• Jane Shock, American Express Center for Community
  Development
• Vice-President CRA Officer

3
Welcome

• Mikael Wagner, Consumer Action
• Director of Training and Outreach

4
Overview

• Whats in your folder
• Brochure
• Training guide
• Activities (Pages 22-34)
• Powerpoint slides
• Material Order Form
• Training Evaluation
• Reimbursement Form

5
Activity My Story

• Select a spokesperson
• Select a recorder
• Create the cover of a book
• Popular song, movie or show
• Expectations (2 to 3)
• 10 minutes to network.
• Share out

6
Types of Cards
7
Credit cards

• Revolving Credit
• Credit line can be used up to the credit limit
• Pay charges in full each month, pay just the
  minimum or make a partial payment greater than
  the minimum due
• Credit limit goes up and down as purchases and
  payments are made

8
Charge cards

• Pay all charges in full every month by the due
  date
• Cannot carry a balance
• No balance no interest
• Some charge cards allow a balance carry-over for
  specific purchases, such as travel charges
• No preset spending limits or credit limits

9
Secured credit cards

• Guaranteed by money deposited in an account
• Credit limit usually equals the amount of the
  deposit
• Can be used by people with credit problems to
  reestablish good credit

10
Sub-prime credit cards

• Marketed to people who have poor credit
• Typically have very low lines of credit, large
  upfront fees and high interest rates

11
Stored Value Cards

• Also called prepaid cards
• These are used by
• retailers as gift cards
• travelers as a safe way to get funds on the road
• parents who want to give their kids the
  convenience of a credit card without the risk

12
Types of offers

• Pre-approved
• Invitations to apply
• Offers come in the mail, by telephone and online
• Instant credit at stores

13
Card Terms and Conditions
14
Cardholder agreements

• Sent with every new card
• Legal contract between consumer and the card
  issuer
• By using the card, consumer agrees to honor the
  terms and conditions in the agreement

15
Subject to change

• Card terms and conditions are subject to change
  at any time
• Change notices are usually sent by mail, along
  with the monthly statement
• Consumers should review everything sent by
  issuer, even if it looks like junk mail
• Using the card after receiving the notice means
  that you accept the changes, even if you have not
  read the notice

16
Annual percentage rate (APR)

• Cards interest charge, expressed as a yearly
  rate
• The interest rate is the cost of borrowing money
  from the credit card company
• Your cards interest rate is usually for
  purchases if you withdraw cash you might be
  charged a higher interest rate

17
Variable rates

• If card has a variable rate, the APR will change
  when interest rates go up or down
• Variable interest rates change according to a set
  formula using an index and a margin
• The most common index is the Prime Rate published
  in the business sections of major newspapers and
  online

18
Fixed rates

• Despite their name, fixed interest rates can
  change as early as 15 days after the company
  gives notice of a new rate

19
Default or penalty rates

• Higher interest rates charged for late payments
  or decline in credit
• Default factors
• Late payment
• Bounced check
• Reduction in credit score
• Higher rate will apply to the existing balance,
  not just new purchases

20
Default with other creditors

• Some companies apply a default or penalty rate if
  consumer fails to make timely payments on their
  other credit cards or loans with other banks
• This is sometimes called universal default

21
Grace period

• The time between the close of the billing cycle
  and the payment due date, after which finance
  charges are assessed
• If you do not carry a balance from the last
  credit card bill, interest will not be charged if
  the new bill is paid in full by the due date

22
Gotta go, gotta go

• Lets take a 10 minute stretch break

23
Credit Card Billing Statements
24
Minimum monthly payment

• The lowest amount you are required to pay each
  month
• Paying more than the minimum helps reduce the
  amount of interest owed on the card
• Paying just the minimum amount does very little
  to reduce the amount owed

25
Payment due date

• The last day that payment can be accepted without
  penalty, (20-30 days after close of billing
  cycle?
• If payment is not received by the due date, a
  late fee will be charged
• Some companies require payment to arrive before a
  cut-off time on the due date.

26
Effective APR

• The effective APR includes all fees and charges
• By law, your effective APR must be disclosed on
  your billing statements
• This disclosure is designed to show you how
  costly it can be to pay late fees and other
  penalty fees
• Read your statements

27
Dispute Rights

• Has anyone ever found a mistake on credit card
  statement or bill?
• What do you do?

28
Dispute Charges

• You can dispute charges for
• The wrong amount
• Something you didnt accept
• An item or service that was not delivered

29
Credit Card Fees
30
Credit Card Fees

• How do you avoid credit card fees?

31
Annual fees

• Fewer than half of all cards now have annual fees
• Annual fees are common on charge cards, rewards
  and airline miles credit cards
• If you do not make at least a few charges during
  the year for inactivity

32
Annual fee tips

• Consider the overall value of a card when
  comparing fee and no-fee cards
• For cards with airline miles or other rewards,
  make sure the cards benefits and services are
  worth the price of the fee

33
Application fee tips

• Secured credit cards are generally much better
  deals than sub-prime credit cards
• Many sub-prime cards and some secured cards
  charge a fee when an account is opened
• You can find secured credit cards that dont
  charge application fees
• FMI - Check out www.bankrate.com to find
  companies offering secured cards

34
Balance transfer fee

• Charge for transferring a balance from another
  credit card
• Commonly assessed as a percentage of the cash
  advance (for example, 3)
• When applying, ask about balance transfer fees
• Most companies dont charge fees to new
  cardholders for the first month or two

35
Cash advance fee

• Commonly charged as a percentage of the cash
  advance (for example, 3)
• Minimum charges are common
• Expensive way to get cash
• Interest accrues immediately
• Use your ATM or debit card to withdraw cash from
  your bank

36
Currency conversion fee

• Fees charged for purchases made overseas, or
  purchases made from companies based outside the
  U.S.
• Fees may vary
• Traveling abroad

37
Late fees

• Always pay bills on time to avoid fees
• Allow at least 7 days for the payment to arrive
• Consider online bill pay, pay-by-phone or
  automatic payments from bank account

38
Credit limits

• Avoid credit cards that charge when over the
  credit limit (11)
• Know your credit limit
• Keep your credit in good shape by accessing no
  more than 50 of your credit limit at any time
• Call when an increase is needed
• Find out if there is a free e-mail alert

39
Card Options Benefits
40
Optional services

• Most card issuers offer optional services for a
  fee
• These may include credit protection insurance or
  fraud prevention plans

41
Your choice

• You do not have to buy optional services
• Not buying them will not affect your card
  application or change the terms of the card
• Before making a decision on whether to purchase
  optional services, get detailed information and
  review the limitations and restrictions of the
  service

42
Free benefits

• Zero liability if your card is used to make
  purchases without your authorization
• Cash rebates or merchandise rewards
• Rental car collision damage waiver (CDW)
  coverage
• Buyers protection against loss and theft
• Extended warranties on items you buy using your
  card

43
Common fee-based services

• Credit protection services
• Identity theft monitoring services

44
Credit protection insurance

• Make your loan payments if you die, become ill or
  unemployed
• Coverage is quite expensive
• There are significant limitations

45
ID theft monitoring services

• Credit monitoring companies charge a yearly fee
  to check your credit report
• Alerts you if information in your report changes,
  such as reviews by potential creditors or new
  accounts
• You can check your credit report yourself for free

46
Thank you!

• For more information contact us at
• info_at_consumer-action.org
• Toll free 800-999-7981
• Web Site
• www.consumer-action.org