Transcript Credit - Huntington Local Home

A
loan of money given to a borrower
 Specific
amount to repay
 Specific
time to repay
 Generally
has a cost to it

Installment Credit – fixed monthly payments over a
specific time period. (ie: car loan; personal loan at a
bank)

Service Credit – credit for services you use then pay
for the service after you use it (ie: electricity, water,
cable TV)

Revolving Credit – credit cards that you charge, payon, charge again, pay-on again, charge again, pay-on
again, etc. etc. etc.

Charge Credit – credit you pay in full each month;
usually to local businesses you have business dealings
with. (ie: building contractors; corner grocery
stores)

Credit Risk

The risk that a borrower may not repay a loan on time
 From
your credit history, does it look like you
possess the honesty and reliability to pay
credit debts
Have you used credit before?
 Do you pay our bills on time?
 Do you have a good credit report?
 Can you provide character reference?
 How long have you lived at your present address?
 How long have you been at your present job?

Past performance dictates future results
 Have
you been working regularly in an
occupation that is likely to provide enough
income to support your credit use?

Do you have a steady job? What is your salary?

How many other loan payments do you have?

What are your current living expenses? What are
your current debts?

How many dependents do you have?
 Do
you have any valuable assets? Could
these assets be used to repay credit debts if
income is unavailable?
 What
property do you own that can secure
the loan?
 Do
you have a savings account?
 Do
you have investments to use as collateral?

The cost of using the loan or the credit card
money

Usually expressed as a percentage over a period
of time

What are typical credit card interest rates?

Abbreviation for Annual Percentage Rate

The APR is basically the cost of credit, or how
much you must pay to get a loan, on a yearly
basis

The APR is expressed as a percentage

It reflects the interest rate as well as other fees
and charges

APRs vary widely from one type of credit to
another
 The
maximum amount of money the person
borrowing the money is allowed to use
A
plastic card with an assigned account
number
 Allows
the holder to purchase goods or
services on credit or receive cash on credit
 Fashion
designer Anna Cohen of Portland,
Oregon needs to keep her start-up company -and her dream of ecologically friendly fashion
-- afloat financially
a) You are taking money from your savings account
to pay for the item.
b) You are getting the item and freeing yourself
from full repayment.
c) You are taking a temporary loan from a bank,
which must ultimately be repaid.
d) You are investing in a financial organization, from
which you may get profits.
c
A) A penalty for making late credit card payments.
B) A charge for borrowing money, generally
calculated as a percentage of the amount borrowed.
C) A reward for making credit card payments on
time.
D) A written agreement describing the terms of use
for a credit card.
B
a) Buying things you cannot afford.
b) Carrying a large balance for a long period of
time.
c) Losing track of purchases and payments.
d) All of the above.
d
A)
They are convenient, they free you from carrying
around large amounts of cash, and using them wisely
can help you establish a strong financial track record.
B)
They can be used to purchase items you cannot
afford, give you extra spending money, and enable
you to borrow money you don't have to repay.
C) They weigh less than cash, are a status symbol, and
give you five years to repay any purchases you make
with them.
D) They are tied into your checking account, can be used
for necessities, and if you lose them, you don't have
to pay back any money you owe on them.
A
a)
A form the bank asks you to complete when you
open a savings account.
a)
The record of purchases and payments to a
credit card during a one-month period.
b)
A statement sent to you each year by the
Internal Revenue Service.
c)
A profile or report of a person's debt and
repayment habits, which is built up over the
course of several years.
d
a)
A good credit rating enables you to buy
things online.
b)
A good credit rating can earn you college
scholarships and tuition waivers.
c)
A good credit rating can impact your ability
to secure future loans, obtain housing, or
get a job.
d)
A good credit rating will give you more
money for your retirement income.
c
A
typical APR is about 18.9%. If you charge
$100 on a card with that APR, over the
course of one year, you would be charged an
additional $18.90 of interest. Your total debt
would be $118.90.
This means it can cost more or less to use each card. It's usually
better to have a low APR, but here are some things to keep in
mind:

A "fixed" APR means that the rate shouldn't change.

Many cards have a "variable" APR, which changes over time.

Be careful of cards that offer a very low, or even 0%,
introductory APR. Introductory APRs usually only last for a
short period of time, so pay attention to what the APR will
become after that time is up.

Some cards offer other rewards, or "points," that can be used
for airline miles, gift certificates, or "cash back." These
rewards can be tempting, but make sure to evaluate all the
aspects of the card, especially the APR.
 Bank
of America’s card offers
 Especially
the “Disclosure Box”
a) 15% fixed APR
b) 2% introductory APR, which goes up to 23%
after 6 months
c) 10% APR, which goes up 1% every month for 10
months
d) 19% fixed APR, with 1 airline mile earned for
every dollar you spend
a
 The
"balance" on your monthly credit card
statement is the total amount you owe to the
bank. The only way to avoid interest piling up
is to pay off the ENTIRE balance each month,
and not to carry any debt over to the next
month. In other words, if you borrow $1000,
and pay back $999 by the end of the month,
you will still be charged interest the next
month!
A)
$10.00
B)
$1000.00
C)
$0.00
D)
$563.25
c
When you first charge something to a credit
card, you often have a period of time before
the bank starts charging you interest. This is
called the grace period, and it usually ranges
from 10 to 55 days, depending on the credit
card.
Which of the following is the best strategy for
paying your credit card bill?
a)
Pay off your entire balance the day after
the grace period ends.
b)
Pay half of your balance during the grace
period and half after.
c)
Pay your entire balance during the grace
period.
d)
Don't charge anything during the grace
period.
c
On the statement each month, there is a
"minimum payment" that must be paid, which
is usually just a small percentage of the total
balance. If you don't pay at least the minimum
payment by the due date, the bank will charge
a "late fee."
Keep in mind that paying just the minimum
payment each month will generally not make
much of a dent in your total balance owed. You
can avoid late fees by paying the minimum
payment, but you will still accumulate interest
on all of your unpaid debt.
a)
Pay exactly the minimum payment.
b)
Pay at least the minimum payment and
more whenever possible.
c)
Pay less than the minimum payment
whenever possible.
d)
Never pay the minimum payment.
b
 When
you are issued a credit card, there is a
"credit limit" attached to it. This is the
maximum amount of money you can charge
to the card (the maximum amount you can
borrow from the bank). Credit cards with
small limits are often safer, because your
amount of potential debt is limited.
a)
$100
b)
$1,000
c)
$10,000
d)
$50,000
b
 Why
do banks lend out so much money?
 So...
are credit cards a bad thing?