CreditandCreditCards Costs and Benefits of Having a Credit Card.

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Presentation transcript:

CreditandCreditCards Costs and Benefits of Having a Credit Card

CreditCards A card issued by a bank or other financial intermediary giving the holder or owneranan option to borrow funds, usually when you purchase items. Credit cards charge interest and are primarily used for short-term financing.

Credit Cards Interest usually begins one month after a purchase is made, and the amount you may borrow is predetermined. The amount you may borrow (or your credit limit) and your interest rate will be determined by your credit rating.

BenefitsofaCreditCard 1.Ease of making purchases - Makes it easier to buy items, especially if you do not want to carry a lot of cash. Some businesses require a credit card, such as hotels and car rentals.

Benefits ofCreditCards 2. Your purchase may be protected if it is lost, broken, or stolen. It may make it easier for you to return the item.

BenefitsofCreditCards 3. Building your credit history - Having a good credit history is often important, not only when applying for credit cards, but also when applying for things such as loans, rental applications, or even some jobs. Having a credit card and using it wisely (making payments on time and in full each month) will help you build a good credit history.

Benefitsof Credit Cards 4.4. Emergencies - Credit cards can also be useful in times of emergency. While you should avoid spending outside your budget (or money you don't have!), sometimes emergencies (such as your car breaking down or a flood lead to a large purchase (like the need for a rental car or a motel room for several nights. orfiremay ©2012, TESCCC

BenefitsofCreditCards 5.5. Safety – You can make purchases without carrying around a lot of cash. Helps prevent you being robbed and losing all your money.

BenefitsofCreditCards 6.6. Extra benefits - In addition to the benefits listed above, some credit cards offer additional incentives, such as discounts from particular stores or companies; bonuses, such as free airline miles or travel discounts; and special insurances (like travel or life insurance). While most of these benefits are meant to encourage you to charge more money on your credit card (remember, credit card companies start making their money when you can't afford to pay off your charges!) the benefits are real and can be helpful as long as you remember your spending limits.

RisksofofCreditCards 1.Overspending - Credit cards encourage people to spend money they do not have. Many people will not pay off the balance each month and continue to charge, blowing their budget.

RisksofofCreditCards 2.2.Interest - If you do not pay off your credit card each month, you will be charged interest. The interest rate is usually very high on credit cards, higher than you earn on money saved.

Risks ofCreditCards 3.3. Debt - When people do not pay off credit cards each month, allow the balance to increase with interest, and continue to charge new purchases, they go into debt.

RisksofofCreditCards 4.4.Credit card fraud - Credit cards can be stolen or lost. People may also steal the information off your credit card and make fraudulent purchases. You must protect your credit information.

Risksof CreditCards 5. Impulse buying - People will not wait until they have the cash or for the item to go on sale.

RisksofofCreditCards 6.6.Sacrifice - You may have to sacrifice things you need now because you must pay off credit cards for things you have already purchased. You may have to give up some long-time goals or give up saving.