Advantages and Disadvantages of Credit

Do now Capital one Bank frequently advertises their credit cards on TV. What are these commercials promoting? How do these companies make money?

Focus Questions What are the advantages of using credit? What are the disadvantages of using credit? What can you do to avoid credit fraud or identity theft?

Advantages of Credit Improves Standard of Living Convenience and Safety Help in Emergencies Help in Recordkeeping Forced Savings

Disadvantages of Credit Interest Charges and Fees grace period a period of time, usually twenty to thirty days, when interest is not charged on current credit card purchases universal default a provision in a credit card contract that allows the bank to charge a higher interest rate if a customer's credit score goes down

Possible reasons for your rate to go up late payments on car, utilities etc. going over your limit carrying too much debt too many credit inquiries new car loan

Disadvantages of Credit Increased impulse buying Financial Problems Bankruptcy is a legal process in which a debtor (a person who owes money) declares the inability to repay debts over a reasonable period of time

Credit Fraud and Identity Theft Credit fraud is the theft and illegal use of someone else's credit information. Identity theft the act of gathering enough information about a person to assume his or her identity, and then using that identity to commit fraud or other crimes.

Safeguarding Your Information Don't give out your Social Security number Do not deal with a company or person you don't know Remove mail as soon as possible Examine all bills Use a shredder Be careful when using an ATM Keep tabs on your wallet Keep receipts and check them against your statement

Monitoring Your Credit History Obtain a credit report and review it for: inquiries from companies you did not contact accounts you did not open debts on your accounts that you cannot explain correct personal information (name, SS#, address, employers' names)

what to do if you discover fraudulent or inaccurate information Contact both the credit bureau and the information provider in writing https://www.annualcreditreport.com/index.action

Reporting Fraud and Identity Theft Contact one of the three credit bureaus Get a fraud alert placed on your credit file Place a security freeze (prevents access to your credit report) Contact the police Report the crime to the FTC

Notify Your Creditors New accounts that you did not open Credit cards, debit cards, that were stolen or used fraudulently