Credit Card Credit Card QuestionsQuestions

What is credit?What is credit? Borrowing money for a fee with the Borrowing money for a fee with the

promise to pay back at a later date. This promise to pay back at a later date. This credit you apply for.credit you apply for. Credit cardsCredit cards loansloans

Your record of borrowing and paying an Your record of borrowing and paying an account. Your record is reflected on your account. Your record is reflected on your credit score. This credit is the result of credit score. This credit is the result of how you handle your money.how you handle your money.

Credit Card Accountability, Credit Card Accountability, Responsibility and Responsibility and Disclosure Act 0f 2009Disclosure Act 0f 2009

Starting in February 2010 Under 21 will have to:

Prove they have a job to pay back the debt

OR Get an adult to co-sign

4 Types of Credit Cards4 Types of Credit Cards

Single ProductSingle Product RevolvingRevolving Travel & Travel &

EntertainmentEntertainment Bank CardBank Card

Single Product CardSingle Product Card

Service for 1 productService for 1 product You pay full amount at the end of You pay full amount at the end of

each montheach month If you don’t pay the full amount when If you don’t pay the full amount when

due, there will be a HIGH penaltydue, there will be a HIGH penalty Example: GasolineExample: Gasoline

Revolving CardRevolving Card

Have to pay a minimum payment Have to pay a minimum payment but you can revolve the balance but you can revolve the balance to the next monthto the next month

Example: Example: Department StoreDepartment Store

Travel & Entertainment Travel & Entertainment CardCard

Has an annual membership feeHas an annual membership fee Receive discounts Receive discounts Pay full balance at the end of each monthPay full balance at the end of each month 30 day account30 day account Examples:Examples:

Diner’s ClubsDiner’s Clubs Hertz Rental CarsHertz Rental Cars

Bank CardBank Card

Revolving 30-day accountRevolving 30-day account Minimum paymentMinimum payment Revolve BalanceRevolve Balance NO Annual FeeNO Annual Fee Example:Example:

VisaVisa MastercardMastercard

Factors Companies Look Factors Companies Look for in Approving or for in Approving or Declining Declining Credit Card ApplicationsCredit Card Applications

You have a job $$$$You have a job $$$$Credit HistoryCredit HistoryLength at your current addressLength at your current address

APRAPR

Annual Percentage Rate (APR) –Annual Percentage Rate (APR) – The amount of interest you pay over The amount of interest you pay over

a yeara year Currently, US has no maximumCurrently, US has no maximum Texas limits it to 21%Texas limits it to 21%

Advantages to CreditAdvantages to Credit

Convenience (widely accepted, easy to Convenience (widely accepted, easy to use)use)

Emergency SituationsEmergency Situations Builds Credit RatingsBuilds Credit Ratings Purchase on Time (Buy Now/Pay Later)Purchase on Time (Buy Now/Pay Later) Statement Shows Record of How you Statement Shows Record of How you

Spend MoneySpend Money

Disadvantages to CreditDisadvantages to Credit

Charge Beyond Your MeansCharge Beyond Your Means Fees & Interest ChargesFees & Interest Charges Lost or Stolen Cards could ruin your Lost or Stolen Cards could ruin your

creditcredit

Credit TermsCredit Terms

Finance ChargeFinance Charge - interest on unpaid (revolved) - interest on unpaid (revolved) balance each monthbalance each month

Minimum PaymentMinimum Payment – lowest payment required – lowest payment required to keep account in good standing (usually 3% to keep account in good standing (usually 3% of total)of total)

Credit LimitCredit Limit – maximum amount you can – maximum amount you can charge on an accountcharge on an account

More Credit Terms…More Credit Terms…

AssetAsset – something you OWN – something you OWN

DebtDebt – something you OWE – something you OWE

Typical Credit CardsTypical Credit Cards ExxonExxon SearsSears Diner’s ClubDiner’s Club VisaVisa Dillard’sDillard’s

TexacoTexaco HertzHertz Master CardMaster Card Discover CardDiscover Card American ExpressAmerican Express

Credit Card TypesCredit Card Types Exxon – Exxon – Single ProductSingle Product Sears – Sears – Revolving Revolving Diner’s Club – Diner’s Club – Travel & EntertainmentTravel & Entertainment Visa – Visa – Bank Bank Dillard’s – Dillard’s – Revolving Revolving Texaco – Texaco – Single ProductSingle Product Hertz Hertz – Travel & Entertainment– Travel & Entertainment Master Card – Master Card – Bank Bank Discover Card – Discover Card – Travel & EntertainmentTravel & Entertainment American Express – American Express – Travel & Travel &

EntertainmentEntertainment