Presentation is loading. Please wait.

Presentation is loading. Please wait.

Chapter 26.1. Explain how you can develop a credit history Examine factors to consider when deciding which credit card to secure Define three factors.

Similar presentations


Presentation on theme: "Chapter 26.1. Explain how you can develop a credit history Examine factors to consider when deciding which credit card to secure Define three factors."— Presentation transcript:

1 Chapter 26.1

2 Explain how you can develop a credit history Examine factors to consider when deciding which credit card to secure Define three factors that creditors consider when granting credit

3 Developing a credit history is important The first step will be choosing a credit card and applying for it Before deciding to issue credit to a customer, a creditor looks at the applicant’s o Capacity o Character o Capital

4 Using credit responsibly can make life easier Using credit in an irresponsible way will harm the ability of a consumer to make future purchases

5 Apply for Credit Approved for Credit Use Credit Make Payments

6 There are five main factors to consider when selecting a credit card: 1.Interest rate 2.Extra fees 3.Whether the interest rate will change 4.Whether a cosigner is needed 5.Whether there is a grace period

7 Questions you should ask before selecting a credit card include: 1.What will the cost of credit be? 2.Who will accept the card? 3.What is the credit limit? 4.Will I be able to use the card to get cash?

8 For all their conveniences, credit cards come with costs such as interest rates and various fees To gauge the cost of credit, first look at the annual percentage rate (APR) Annual Percentage Rate (APR) the cost of credit on a yearly basis

9 A credit card might offer a low introductory APR but change to a much higher rate after a few months Credit card companies will usually charge a fee for a cash advance Cash Advance a loan given in cash by a credit card company in anticipation of the borrower’s being able to repay it

10 Credit card companies will usually charge a fee for late or missed payments Another fee is charged if the card holder is over their credit limit

11 You may need a cosigner when you apply for credit. You should consider whether there is a grace period for payments on your credit card. Grace Period an amount of time allowed to repay a debt without having to pay interest charges Cosigner someone who agrees to be responsible for a debt if the main applicant does not repay it

12 A credit card application asks for information about your address, your job, what other credit you have, and details about your income and savings

13 Before creditors give a consumer a charge or credit account, they want to make sure the consumer is worth the risk

14 The Three Cs of Creditworthiness C C C Capacity: An applicant’s ability to pay. Character: An applicant should be trustworthy. Capital: The money an applicant has beyond debts.

15 Creditors also consider capacity, character, and capital when determining a card holder’s credit limit If a person pays his or her bills on time, most creditors will raise the person’s credit limit Credit Limit the maximum amount a card holder can charge on a credit card

16 Consumers who pay more than the minimum amount each month will pay less interest and pay off their debt more quickly The credit card agreement is a contract If a consumer does not make at least the minimum payment, the consumer is not meeting his or her legal obligation

17 1.How can a consumer develop a credit history? Apply for credit, be approved, use the credit, and make payments to the creditor

18 2. What is an annual percentage rate? Why is it important? The cost of credit on a yearly basis; it determines the amount of interest that a consumer will pay on a debt

19 3. What are the three Cs of credit? Capacity, Character, and Capital


Download ppt "Chapter 26.1. Explain how you can develop a credit history Examine factors to consider when deciding which credit card to secure Define three factors."

Similar presentations


Ads by Google