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, 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 of Credit Card?
Debit Cards are:
Not the same as credit cards
Not a form of credit at all
Directly linked to your bank account