Transcript Credit Cards

Credit Cards
Avoiding the Credit Trap
Credit Cards
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Credit cards are a good way to build
credit, if used wisely
Receive monthly statements. Can be
mailed or digital
Terminology
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Revolving Account – A credit card
account where the entire bill does not
have to be paid each month. (You
keep a “revolving” balance. It comes
back to “haunt” you every month.)This
is the most common type of credit
card. Examples: Visa, Mastercard,
American Express, and Discover Card.
Terminology
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Charge Card – A special type of credit
card that allows the card-holder to
make purchases as long as the bill for
the purchases is paid in full each
month. No interest is charged on
these cards.
Common type is Diner’s Club.
Terminology
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Impulse buying – When a consumer
purchases something that they really
hadn’t intended to buy. Credit cards
allow consumers the flexibility to make
purchases that they did not plan for in
advance. Many stores offer credit
cards to attract customers into the
store in the hopes they will find
something that they want to buy.
Terminology
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Payment due date – the date by
which the credit card company must
receive your payment
Outstanding balance – the amount of
money you still need to repay.
Finance charge – the interest
payment you owe on the credit card
balance
Terminology
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Grace period – a period of time,
generally 20-25 days, before a credit card
company starts charging you interest on
a purchase
Late fee – a penalty you are charged for
not making your minimum payment by
the established payment due date
Annual fee – the amount of money the
credit card issuer charges you for having
the credit card account each year
Terminology
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Cash advance – money you are allowed to
obtain in the form of cash through the use of
an ATM or bank
Cash advance limit – the total amount of
money you are allowed to take from the
account in the form of cash
New purchases/charges – a brief transaction
history showing purchases made with the
credit card since the last statement
http://www.nyc.gov/html/ofe/html/help/stateme
nt.shtml
Terminology
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Previous payments – the amount you paid
on the last credit card bill received and any
other payments you may have made since the
last statement
Daily finance charge – the interest rate you
pay each day on the outstanding balance
Annual percentage rate – the yearly interest
rate you pay on the credit card balance
http://www.nyc.gov/html/ofe/html/help/stateme
nt.shtml
Terminology
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Fair Credit Billing Act – protects you
if there are any errors in your monthly
statement.
Fair Debt Collection Practices Act –
prohibits the creditor from harassing
you or using unfair means to collect
the amount owed.
Terminology
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Truth-in-Lending Act – Protects you
if your credit card is lost or stolen.
Maximum liability for a lost or stolen
card is $50. You are not responsible
for any charges that occur after you
notify the creditor.
Terminology
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Credit Card Act of 2009– Many
changes to credit cards including more
time to pay monthly bills, cannot issue
to people under 21 unless there is an
adult cosigner, clearer due dates,
easier to understand statements, extra
things included on the statement, etc.
Discussion
A friend of yours needs some new
clothes, tires for his car, and a new
stereo system for his car. He asks you
if it would be okay to borrow your
credit card to make the purchases and
then you can report the card stolen so
you or he won’t have to pay for the
purchases. How would you respond to
his request? Why?
Terminology
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Debit cards are not credit cards.
Debit cards are just like checks…the
money is taken out of your checking
account. No credit is issued with a
debit card unless it has the Visa or
MasterCard logo. Then the consumer
can decide at the time of purchase
whether to use the card as a debit or
credit card. Some retailers charge a
fee if you use a debit card at their
location, similar to the fees charged on
a debit card used at an ATM.
Terminology
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Electronic Funds Transfer Act –
protects debit card users against
unauthorized use of their cards. If the
card is lost or stolen, you are not
responsible for purchases made after
the card is reported missing.
Discussion
What are some of the ways that
consumers get “trapped” by credit
cards? How can consumers ensure
that they stay out of this credit card
trap?