charge it right 1. 2 introduction instructor and student introductions. module overview
TRANSCRIPT
Charge It Right 1
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Introduction
• Instructor and student introductions.
• Module overview.
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Student Introductions
• Your name.
• Your expectations, questions and concerns about credit cards.
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Purpose
Charge It Right will teach you about credit cards and how to use them responsibly.
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Objectives
By the end of this course, you will be able to:
• Describe the purpose of credit cards.
• Determine which credit card is best for you.
• Identify the factors creditors look for when making credit decisions.
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Objectives (Continued)
• Describe how to use a credit card responsibly.
• Identify the steps to take when a credit card is lost or stolen.
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Agenda and Ground Rules
• 90 minutes long
• One 10-minute break
• Training methods
• Classroom participation
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Credit Cards
Credit cards:
• Are a convenient form of borrowing.
• Give you a revolving line of credit.
• Require a minimum payment each month.
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Other Cards
• Cash cards
• Smart cards
• Stored value cards
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Secured and Unsecured Cards
• You do not have to provide “collateral” in order to get a credit card.
• A credit card is an “unsecured” loan.
• You can get a “secured” credit card if you have no credit history or a negative credit history.
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Gold and Platinum Cards
These cards:
• Have a higher credit limit.
• Require good credit history and higher income.
• May not have favorable terms.
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Reward Cards
These cards:
• Are offered by hotels and airlines.
• Charge an annual fee.
• May give you cash rebates
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Pre-approved Card Offers
• Credit card companies look at your credit report and determine that you MIGHT qualify for the interest rates and credit limit being offered.
• Whether or not you get the best terms depends on your income, employment, and credit history.
• Shop for the best terms.
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Credit Card Terms
Annual percentage rate (APR)
Fees
Grace period
Balance computation method
Cash advance
Balance transfer
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Annual Percentage Rate
Interest rate + fees = APR, expressed as a yearly percentage rate
• APRs are either fixed or variable.
• Penalty APRs are about 52 percent higher than regular APRs.
• Credit card companies must state how long “introductory” APRs last.
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Fees
• Annual fees
• Late fees
• Over-the-limit fees
• Balance transfer fees
• Cash advance fees
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Grace Period
The number of days you have to pay your balance before the credit card company starts charging interest.
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Balance Computation Method
• The balance computation method will determine how your interest is calculated.
• The most common method used is the average daily balance.
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Cash Advance
The ability to get cash from your credit card.
• Credit card companies charge a fee for this service.
• Example: 2%/$10 The cash advance fee is 2 percent of the cash advance amount or $10, whichever is greater.
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Balance Transfer
• Balance transfer is the process of moving unpaid credit card debt from one credit card to another.
• Credit card companies sometimes offer low rates to encourage balance transfers coming in.
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Other Factors to Consider
• Customer service
• Additional protection
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Application Requirements
• Individual credit – based on the assets, income, and credit history of the individual
• Joint credit – based on the assets, income, and credit history of both people who apply.
• Age requirement – 18 years old
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Credit Report
A credit report is a record of how you have paid your debts. It tells lenders:
• Who you are.
• How much debt you have.
• Whether you have made payments on time.
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Credit Report (Continued)
• Whether there is negative information about you in public records.
• Inquiries made about you.
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Credit Reporting Agencies
• Equifax
• Experian
• TransUnion
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Credit Score
The credit score:
• A number that predicts how much of a credit risk you will be.
• Calculated based on information in your credit report.
Check your credit score before applying for new credit.
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FICO Score
• Scores range from about 300 to 900.
• Takes into account:– Past payment history – 35 percent– Outstanding debt – 30 percent– How long you've had credit – 15 percent– New applications for credit – 10 percent– Types of credit – 10 percent
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VantageScore
• Was introduced in March of 2006.
• 3 credit reporting agencies use the same scoring system.
• Scores range from 501 – 990.
• A, B, C, D, F
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Denial Notice
Lists the reasons for denying credit, such as:
• You have a bad credit history.
• You have not been at your current address or job long enough.
• Your income does not meet the creditor’s criteria.
Also called an “adverse action” notice.
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Lost or Stolen Credit Card
• Be careful giving personal information over the telephone or on the Internet.
• Immediately notify your credit card company if your card is lost or stolen.
• If you think you are a victim of credit card fraud, immediately contact your credit card issuer.
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Credit Limit
• This is the maximum amount of money the credit card company is loaning you.
• If you go beyond this limit, the credit card company will assess an over-the-limit fee.
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Item Price APRInterest
Paid
How Much You
Really Pay for the Item
Total Years to Pay
Off
TV $500 18% $216 $716 5
Computer $1,000 18% $516 $1,516 7
Furniture $2,500 18% $1,415 $3,915 10
Cost of Making the Minimum Payment
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Original Balance
APRMonthly
Payments
Total Number
of Monthly
Payments
Total Years
to Pay Off
Total of Payments
$2,500 18%Minimum Payment
(MP)123 10 $3,915
$2,500 18% MP + $25 50 4 $3,258
$2,500 18% MP + $50 33 3 $2,839
Benefit of Making More Than the Minimum Payment
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Original Balance
APRMonthly
Payments
Total Number of
Monthly Payments
Total Years
to Pay Off
Total of Payments
$1,000 18%Minimum Payment
(MP)87 7 $1,516
$1,000 18% MP + $25 26 2 $1,187
$1,000 18% MP + $50 16 1 $1,119
Benefit of Making More Than the Minimum Payment
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Credit Card Statement
• The front of the statement lists detailed activity during the account billing cycle.
• The reverse side describes some basic terms of your credit card agreement, including how the interest is calculated and where to call with billing questions.