1. Unit Five: Credit CardsPersonalMoneyManagementJune 2012Saunders Learning Group, LLC, Andover, KS

2. Topics Applying for a Credit Card Typesof Credit Cards Credit Card Finance Charges ReadingYour Credit Card Statements Managing Credit Card Debt Your Responsibilities and Rights KnowingHow Much You Can AffordSaunders Learning Group, LLC, Andover, KS 3. Training from Saunders Learning GroupSaunders Learning Group provides a varietyof training programs, workshops andseminars targeted to the financial servicesindustry.Programs are available in a wide range oftopics, and we are specialists in developingcustom programs that are targeted to yourneeds.Contact the founder, Floyd Saunders at316-680-6482 or atfloyd@floydsaunders.com for moreinformation.Saunders Learning Group, LLC, Andover, KS3 4. WelcomeIntroductionsSaunders Learning Group, LLC, Andover, KS 5. applying for a credit cardcosts: Annual Percentage Rate (APR) Grace period Annual fees Transaction fees Balancing computation methodfor the finance chargefeatures: Credit limit How widely the card is accepted What services and features areavailableSaunders Learning Group, LLC, Andover, KS 6. comparing credit cards Type of account Annual fee Grace period Annual Percentage Rate (APR) Credit limit Minimum monthly payment Finance charge calculation method Late payment fee, other fees Other featurescollege lesson 5 - slide 5-DSaunders Learning Group, LLC, Andover, KS 7. Types of Credit Cards Saunders Learning Group, LLC, Andover, KS 8. Types of Credit CardsSaunders Learning Group, LLC, Andover, KS 9. Types of Credit CardsSaunders Learning Group, LLC, Andover, KS 10. Types of Credit CardsSaunders Learning Group, LLC, Andover, KS 11. calculating finance chargesaverage daily balance:You pay interest on the average balance owed during the billing cycle. The creditor figures thebalance in your account on each day of the billing cycle, then adds together these amounts anddivides by the number of days in the billing cycle.adjusted balance:You pay interest on the opening balance after subtracting the payment or returns made during themonth.previous balance:You pay interest on the opening balance, regardless of payments made during the month.past-due balance:No finance charge is added if the full payment is received within the grace period. If it is notreceived, a finance charge for the unpaid amount is added on to your next bill.college lesson 5 - slide 5-BSaunders Learning Group, LLC, Andover, KS 12. examples of finance charges averageadjustedprevious daily balance balance balancemonthly 1.5%1.5%1.5%rates 18%18% 18%previous balance$400$400$400payments$300$300$300On 15th day (new balance =$100)average daily balance $250*N/A N/A$3.75$1.50 $6.00finance charge(1.5% x $250)(1.5% x $100) (1.5% x $400)* To figure average daily balance:($400 x 15 days) + ($100 x 15 days) = $250 x 30 daysSaunders Learning Group, LLC, Andover, KS 13. what to do if youre denied creditif you think the reasons for the denial are valid:Ask the creditor if you can provide additional information or arrange alternate credit terms.Apply to another creditor whose standards may be different.Do the things you need to do to improve your creditworthiness (pay bills on time, increase income,reduce spending, obtain a secured card, etc.) and then reapply.if you are not sure whether the reason for the denial is valid: Ask the creditor to explain why you were denied. Review your credit history. If you find your credit history contains errors, take steps to correct the errors.if you believe the reason for the denial is invalid and that the creditorhas discriminated against you:Notify the federal enforcement agency whose name you were given by the creditor. The federalenforcement agency will investigate and report back to you.If you can afford it, hire an attorney to file suit against the creditor. If the court determines thecreditor did discriminate, the creditor will be required to pay you actual damages plus punitivedamages.Saunders Learning Group, LLC, Andover, KS 14. reading acredit cardstatementSaunders Learning Group, LLC, Andover, KS 15. dealing with billing errorsfair credit billing act (1974) Sets up a procedure for the quick correction ofmistakes that appear on consumer credit accounts. You can challenge a billing statement for errorssuch as charges for unauthorized purchases, chargesfor items that were never delivered, failure to credit a payment, etc. You must notify the creditor of a disputed item within 60 days. Creditor must investigate and, within two billing periods, eithercorrect the mistake or explain why the charge is not in error. You cannot be billed for or forced to pay the disputed amount untilthe creditor has finished the investigation. If it is determined that you are responsible for the bill, you must begiven the usual amount of time to pay it. Your credit history is protected during the dispute process. Creditor must supply customers with a statement of their rights atthe time the account is opened and at least twice a year thereafter.Saunders Learning Group, LLC, Andover, KS 16. other credit card protectionsprompt credit for payment A card issuer must credit your account on the day the issuerreceives your payment, unless the payment is not madeaccording to the creditors requirements.refunds of credit balances When you return merchandise or pay more than you owe,you have the option of keeping the credit balance on youraccount or receiving a refund.unauthorized charges If you report your card lost before it is used, you cannot beheld responsible for any unauthorized charges. If your card is used before you report it lost, you are liablefor $0 if reported within two business days. After that, youreliable for no more than $50.00.disputes about merchandise or services In some circumstances, you have the right to withholdpayment for unsatisfactory merchandise or services.Saunders Learning Group, LLC, Andover, KS 17. credit card dos and dontsshop around Look at various sources.read and understand the contract Read the contract carefully. Dont rush into signing anything. Once a contract is signed, get a copy of it. Know the penalties for missed payments.know your cost Figure out total price when paying with credit. Make the largest payments possible. Know the penalties for missed payments. Buy on installment credit only after you have evaluated allother possibilities. Dont be misled into thinking small payments will be easy.Saunders Learning Group, LLC, Andover, KS 18. the three Cs of creditcharacterwill you repay the debt?From your credit history, does it look like you possess the honesty and reliability to pay credit debts?Have you used credit before?Do you pay your bills on time?Do you have a good credit report?Can you provide character references?How long have you lived at your present address?How long have you been at your present job?capitalwhat if you dont repay the debt?Do you have any valuable assets such as real estate, savings, or investments that could be used torepay credit debts if income is unavailable? What property do you own that can secure the loan? Do you have a savings account? Do you have investments to use as collateral?capacitycan you repay the debt?Have you been working regularly in an occupation that is likely to provide enough income to supportyour credit use? Do you have a steady job? What is your salary? How many other loan payments do you have? What are your current living expenses? What are your current debts? How many dependents do you have? Saunders Learning Group, LLC, Andover, KS 19. your responsibilities Borrow only what you can repay. Read and understand the creditcontract. Pay debts promptly. Notify creditor if you cannot meetpayments. Report lost or stolen credit cards promptly. Never give your card number over the phone unlessyou initiated the call or are certain of the callers identity.Saunders Learning Group, LLC, Andover, KS 20. your rightstruth in lending act (1968)Ensures consumers are fully informed about cost and conditions ofborrowing.fair credit reporting act (1970)Protects the privacy and accuracy of information in a credit check.equal opportunity act (1974)Prohibits discrimination in giving credit on the basis of sex, race, color,religion, national origin, marital status, age, or receipt of public assistance.fair credit billing act (1974)Sets up a procedure for the quick correction of mistakes that appear onconsumer credit accounts.fair debt collection practices act (1977)Prevents abuse by professional debt collectors, and applies to anyoneemployed to collect debts owed to others; does not apply to banks or otherbusinesses collecting their own accounts.college lesson 4 - slide 4-D Saunders Learning Group, LLC, Andover, KS 21. how much can you afford?(the 20-10 rule)never borrow more than 20% of your yearly net incomeIf you earn $800 a month after taxes, then your net income in one year is:12 x $800 = $9,600Calculate 20% of your annual net income to find your safe debt load.$9,600 x 20% = $1920So, you should never have more than $1920 of debt outstanding.Note: Housing debt (i.e., mortgage payments) should not be counted as part of the 20%, but other debt should be included, such as car loans, student loans and credit cards.monthly payments shouldnt exceed 10% of your monthly net incomeIf your take-home pay is $800 a month:$800 x 10% = $80Your total monthly debt payments shouldnt total more than $40 per month.Note: Housing payments (i.e., mortgage payments) should not be counted as part of the 10%, but other debt should be included, such as car loans, student loans and credit cards.college lesson 4 - slide 4-ISaunders Learning Group, LLC, Andover, KS 22. QuestionsSaunders Learning Group, LLC, Andover, KS 23. Post Workshop Action Plan Complete the Post Workshop Action PlanSaunders Learning Group, LLC, Andover, KS23 24. About the Presenter Floyd Saunders has worked on Wall Streetwith both Bank of America and JPMorgan,where is was a vice president in globalfinancial systems. He has worked acrossthe industry in retail, commercial, andinvestment banking. He has taught courses in Money andBanking, Principles of Banking, ManagerialFinance and extensively for the AmericanInstitute of Banking and various colleges. As a consultant, he developed and taughta wide range of banking and investingcourses. He authored three programs for theAmerican Bankers Association: Banking onMutual Funds and Annuities, Introduction toSecurities Markets and Investing inSecurities. He is the author of Figuring Out WallStreet, a consumers guide to financialmakets Look for his next book, Family FinancialFreedom available as an e-book soon.Saunders Learning Group, LLC, Andover, KS