Transcript Credit Cards

Credit Cards
Rules and Legislation
How does a credit card
work?
 Purchase Item: Approval: Sign
 Merchant sends receipt to bank gets credit for
transaction
 VISA processes and sends money to
bank/debts card holder
 Electronic notification to card holder
 Bills card holder
 *companies charged fees but do not usually
mind*
Difference Between:
 Credit Card
 Charge Card
 Smart Card
Credit Card Company will
issue you
 Credit Line
 Interest Rate – ignore “teaser” rates
 APR – annual percentage rate
 Interests compound daily
 A lower rate makes a difference!!
 Finance charge
 Grace Period
 Annual Fee – DO NOT WANT ONE!!
Understanding YOUR
STATEMENT
 NEW BALANCE VERSUS PRINCIPAL
 MINIMUM PAYMENT DUE
THREE BIGGEST COSTS
OVER LIMIT
LATE CHARGES
CASH ADVANCES
Biggest Mistakes
 CASH ADVANCES…
 3-5% BALANCE OR 5-10 FEE PLUS 25%
INTEREST RATE
 NOT PAYING IN FULL EACH MONTH
 Obviously…. Spending more than you
can pay each month
What are the challenges of
credit card use?
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Maintaining your budget
High Interest Rates and Debt
Credit Card Fraud
http://video.nytimes.com/video/2008/12/3
1/business/1194837095176/debt-trapcollege-borrowing-catchesup.html?scp=4&sq=debt&st=Search
What are the advantages
of having a credit card?
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Purchasing Power/ Ease of Purchase
Building a line of credit
Protection of Purchases
Emergencies
Rewards
How does the government
protect credit card users?
 2003 legislation
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Free Credit Report
No credit card numbers on bills
Red Flags
More notification
What is a credit report?
 What is a credit report?
 Why does your credit report matter?
What is a credit report?
 Your credit report
contains your credit
history as reported to
the credit reporting
agency by lenders
who have extended
credit to you.
What is specifically on the
report?
 Includes:
 Addresses
 Social Security No.
 Current/Previous
Employers
 Estimated Income
 Credit History: payments,
time, amount
 Credit cards
 Loans
 Collections
 Bankruptcy
What’s the magic number?
850
 What is your FICO
score?
 35% payment history
 30% amounts owed
 15% length of credit
history
 10% new history
 10% types of credit
used
How do I get my credit score?
Consumer Reporting Agencies
 Equifax
 TransUnion
 Experian
Government regulated but NOT
government agencies
• It is estimated that 40% of credit reports
are inaccurate!*
What if there is wrong
information?
 Tell agency what information you believe
is incorrect
 Clearly identify each item in your report
you dispute.
 State the facts and explain why you
dispute the information.
 Request deletion or correction.