Credit and Credit Cards

1
Credit and Credit Cards
2
What is Credit?

• Credit is an arrangement to receive cash, goods,
  or services now and pay for them in the future.
• Consumer credit is the use of credit for personal
  needs.

3
What are Credit Cards?

• Pre-approved credit which can be used for the
  purchase of items now and payment of them later.
• The average household receives five credit card
  offers per month in the mail, and more by
  telephone and the Internet.
• Remember, that the average household in the
  United States carries over 8, 400.00 in credit
  card debt.

4
Why Use a Credit Card?

• Proper use can help establish a good credit
  rating (FICO Score)
• Conveniently accepted across the United States
  and around the world
• Emergency buying power
• Additional form of identification
• Record of purchases on bill statement
• Often required to hold a reservation

5
Why Not Use a Credit Card?

• Improper use can damage credit rating (FICO
  Score)
• 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

6
Types of Credit Card Accounts

• Revolving
• Charge
• Secured
• Sub-Prime
• We will briefly discuss these four types of
  credit cards over the next few slides.

7
Revolving Credit Cards

• 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
• Available credit goes up and down as purchases
  and payments are made
• Most credit cards are revolving credit cards

8
Charge Credit Cards

• Pay all charges in full every month by the due
  date
• Cannot carry a balance
• No balance no interest
• A regular issue American Express Card is an
  example of a charge credit card.

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
Understanding the Credit Card Billing Statement

• Some Important Terms Include
• Minimum Payment Due minimum amount to be paid
• 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

12
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
• Grace Period The time between the close of the
  billing cycle and the payment due date
• Remember, if you do not carry a balance from the
  last credit card bill, interest will not be
  charged on purchases if the new bill is paid in
  full by the due date (This is the most important
  thing to remember concerning credit card usage!
  Pay off the bill in full and never pay interest
  to the credit card company!)

13
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 !

14
Credit Card Safety Tips

• Sign card with signature or 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 number unless making
  purchases
• Keep a list of all cards, account numbers, and
  phone numbers separate from cards
• Report lost or stolen cards promptly

15
Are Debit Cards a type ofCredit Card?

• Debit Cards are
• Not the same as credit cards
• Not a form of credit at all
• Directly linked to your bank account