2What 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.
3What 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, in credit card debt.
4Why Use a Credit Card?Proper use can help establish a good credit rating (FICO Score)Conveniently accepted across the United States and around the worldEmergency buying powerAdditional form of identificationRecord of purchases on bill statementOften required to hold a reservation
5Why Not Use a Credit Card? Improper use can damage credit rating (FICO Score)Higher risk for impulsive buying and overspendingDebt trap when used unwiselyExpensive way to borrow due to high interest ratesLess to spend in the future due to paying off purchases from pastPossible hidden fees & surchargesPrivacy is an increasing concernIdentity theft easier
6Types of Credit Card Accounts RevolvingChargeSecuredSub-PrimeWe will briefly discuss these four types of credit cards over the next few slides.
7Revolving Credit Cards Credit line can be used up to the credit limitPay charges in full each month, pay just the minimum, or make a partial payment greater than the minimum dueAvailable credit goes up and down as purchases and payments are madeMost credit cards are revolving credit cards
8Charge Credit CardsPay all charges in full every month by the due dateCannot carry a balanceNo balance = no interestA regular issue American Express Card is an example of a charge credit card.
9Secured Credit Cards Guaranteed by money deposited in an account Credit limit usually equals the amount of the depositCan be used by people with credit problems to reestablish good credit
10Sub-Prime Credit Cards Marketed to people who have poor creditTypically have very low lines of credit, large upfront fees and high interest rates
11Understanding the Credit Card Billing Statement Some Important Terms Include:Minimum Payment Due: minimum amount to be paidPast Due Amount: the previous amount due which was not paid before the due dateDue Date: the day by which the company requires a payment to be madeNew Balance: the total amount owed on a credit card
12ContinuedCredit Line: the maximum amount of charges allowed to an accountClosing Date: last day for transactions to be reported on the statementCharges, Payments, and Credits: the transactions which occur with the use of a credit cardFinance Charge: charges assessed for credit card useGrace Period: The time between the close of the billing cycle and the payment due dateRemember, 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!)
13Using a Credit Card Properly Only use when there is no doubt about ability to pay-off the charges at the end of the billing cycleRecord all expenses and keep receiptsCheck credit statement for errorsAlways pay off balance completely and timely !
14Credit Card Safety Tips Sign card with signature or “Please See ID”Do not leave cards lying aroundClose unused accounts in writing and by phone, then cut up the cardDo not give out account number unless making purchasesKeep a list of all cards, account numbers, and phone numbers separate from cardsReport lost or stolen cards promptly
15Are Debit Cards a type of Credit Card? Debit Cards are:Not the same as credit cardsNot a form of credit at allDirectly linked to your bank account