Transcript Banking
Banking and Credit Cards Fees ATM Fee- charge for using ATM services from a different bank Stop payment fee- used when a check is lost or stolen Transaction fee- charge for every transaction over the allowed limit Overdraft fee/Return item fee – charge for overdrawing your account Fees & Terms Loose coin fee- charge for depositing loose change Electronic wire- bank will electronically transfer collected funds to another account EFT- Electronic Funds Transfer- any transaction recorded electronically Types of Accounts Checking- funds are taken out using checks, ATMs, debit cards and in person (does not earn interest) Savings- deposit money where it earns interest (bank can change the interest rate) Checking Account Write a check to PSE&G for utilities in the amount of $54.78 Write a check out to Commerce Bank for a car payment for $495.95 PSE&G for utilities- $54.78 Commerce Bank for a car payment- $495.95 725.00 2670 9/19 PSE&G 54.78 54.78 Types of Accounts Certificates of Deposit (CDs)- earn a fixed interest rate for a certain period of time with a penalty for early withdrawal Money Market- like a savings account, interest rate usually increases at balanced levels, requires a minimum balance and limits withdrawals P. 33 Credit Cards Credit Cards Credit allows you to purchase items and pay the cost over a period of time at a later date. Credit is available in the form of: – Loans (for big purchases such as car, house) – Credit cards (allows you to make purchases at a variety of businesses) Establishing Good Credit… Creditors look at: – Job history – Earnings – Education – Rental history – Payments of utilities – Savings and checking accounts Establishing Good Credit… Get a credit card to establish credit history – Start small (limit $500.00) – Pay in full in each month – Avoid cards with annual fees – Avoid cards with high interest rates *Late or missed credit card payments can double or triple your interest rate Bad credit Follows you around for 7-10 years Obtain your credit history from the Credit Bureau Credit payments should NOT exceed 20% of take home pay Credit Scores >750 excellent 700-749 good 650-699 okay <600 high credit risk (high interest rate) Credit cards Make the largest monthly payment you can afford – If you paid off $1,000 credit card debt using the minimum payment at 18% APR, it would take you 6 years and cost you about $560 in interest – Americans pay over $120 Billion dollars a year in interest costs – Look for cards with low APR (annual percentage rate) Credit Cards $500 balance with 24% APR ($120 fee) $500 balance with 10% APR ($50 fee) Minimum monthly payment- minimum payment required against outstanding balance, usually only slightly more than interest charges Positive aspects of using credit You can purchase something that is nearly impossible to save all the money for, such as a car Using credit builds a good credit history Credit cards are useful in case of emergencies (if furnace goes out in the middle of winter) Negative aspects of using credit You end up paying more for an item than it really costs if you don’t pay it all off at once Example: Buy a $800 stereo with a store credit plan of no interest for 6 months. Negative aspects of using credit – Must pay $800 back before 6 months – If you don't, the interest has been accumulating over that 6 months, and even if you paid $750, you are going to have to pay the interest accumulated over the 6 months. – may look like a good deal, BUT most people don't pay off the balance within the specified time Negative aspects of using credit Getting a credit card is easy… – It lures people into getting things they do not need and spending money over their budget -Even though the monthly payment may be low, the total amount that needs to be paid back far exceeds the actual cost of the item. Credit card debt increasing each year Negative aspects of using credit Using credit cards does not allow a person to develop financial discipline Credit Bureaus Obtain a credit report about your own credit history – Equifax Credit Information Services – TRW Consumer Assistance Center 2000 Credit card debt increases with age College student debt 2000 Nearly 23% of college students owe $7,500 or more in credit card debt Test your credit card knowledge… Test your credit card knowledge When you're approved for a credit card, the advertised interest rate will always remain at that level. Test your credit card knowledge The only costs you'll pay for a credit card are the interest fees on unpaid balances. Test your credit card knowledge Your payments on cash advances will be the same as for items you charge at a store or other business. Test your credit card knowledge Credit card companies make all their profit on the interest paid by cardholders. Test your credit card knowledge A good way to handle your credit card debt is to pay the minimum payment each month. Test your credit card knowledge The majority of college students use credit cards for emergencies only. Test your credit card knowledge The average consumer has three credit cards. Test your credit card knowledge Your state protects you by setting the highest credit card interest rate you'll pay. Test your credit card knowledge You'll never be able to charge more than your credit card limit. Test your credit card knowledge If you've charged to the limit on one card, it makes sense to apply for another.