Transcript Learning About Credit

USE CREDIT WISELY
Consumer Action created this project in partnership with
Consumer Action: Use Credit Wisely
Advantages of Credit
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What can credit do for you?
Help you through a financial emergency
Enable you to pay for a purchase over time
Provide a short, interest-free loan
Enable you to rent a car, hotel room, etc.
Offer convenience, security when shopping
Rebates or rewards
Allow you to avoid carrying cash
Allow you establish credit/build good credit
Consumer Action: Use Credit Wisely
Types of Credit
Installment Credit
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Fixed number of monthly
payments
Car loans, mortgages
Revolving Credit
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Short-term, open-ended
Assigned credit limit
Available credit fluctuates
as you make purchases &
payments
Option to make full or
partial payment
HELOCs, credit cards
Consumer Action: Use Credit Wisely
Card Types
Credit, charge & debit cards
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Visa, MasterCard, Discover
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Affinity cards
Rewards cards
Secured cards
Retail and gas cards
Stored value (prepaid) cards
Charge cards
Debit cards
Consumer Action: Use Credit Wisely
Credit Card Terms
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Credit limit
Method of computing the balance
Minimum payment
Payment due date
Grace period
Interest rate
Fees
Consumer Action: Use Credit Wisely
Credit Card Terms: Interest
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The lender’s fee for
allowing you to use its
money
Expressed as a percentage
of the credit
Fixed vs variable interest
rate
Annual percentage rate
(APR)
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Periodic interest rate
Different rates for a single
card:
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Teaser
Cash advance
Purchase
Penalty/Default
Balance transfer
Effective interest
Consumer Action: Use Credit Wisely
Credit Card Fees
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Application fee
Annual fee
Balance transfer fee
Cash advance fee
Currency conversion fee
Late fee
Overlimit fee
Bounced check/returned item fee
Miscellaneous fees
Consumer Action: Use Credit Wisely
Activity: Credit Card Jeopardy
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Break into three groups
Choose one person on your team to “buzz” in when you think
you have the correct “question” to the answer
A correct answer earns the point. An incorrect answer loses a
point and allows another team to “steal” the point.
Remember to phrase your answer in the form of a question.
Consumer Action: Use Credit Wisely
Credit Card Billing Statements
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Opening/closing date
Past due amount
New balance
Minimum payment due
Due date
Account summary
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Transactions
Rewards information
Explanation of finance
charges
Effective APR
Consumer Action: Use Credit Wisely
Food for Thought
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In 2007, credit card customers who revolved their debt (didn’t
pay the balance in full each month) paid $18.1 billion in
penalty fees to credit card companies.
Source: “Don’t Get Clobbered By Credit Cards,” by Gary Weiss
Consumer Action: Use Credit Wisely
Comparing Credit Cards
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Credit limit
Purchase APR
Balance transfer APR
Cash advance APR
Promotional APRs
Penalty APR
Variable-rate info
Grace period
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Annual fee
Transaction fees
Penalty fees
Balance computation
method
Minimum finance charge
Rewards
Consumer Action: Use Credit Wisely
Activity: Credit Card Match-Up
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Break into groups
Answer the questions for each scenario based on what you
have learned so far
There may be more than one “right” answer to each question
Choose a spokesperson to explain your choices
Consumer Action: Use Credit Wisely
Obtaining Credit
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Pre-approved offers
Invitations to apply
Instant credit
Consumer-initiated application
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Banks, credit unions, retailers, card companies, and other institutions
Compare offerings, terms
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www.consumer-action.org
www.bankrate.com
www.cardtrak.com
www.cardratings.com
Consumer Action: Use Credit Wisely
Using Credit Wisely
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Know your credit limit and don’t exceed it
Charge only as much as you can repay
Pay more than the minimum, if possible
Pay by your due date (and time!)
Use a debit card, not a credit card, to get cash
Don’t accumulate too much debt
Avoid penalty fees and rates
Consider optional fee-based services carefully
Contact a credit counselor (www.nfcc.org or www.aiccca.org)
Consumer Action: Use Credit Wisely
Congratulations!
You’ve completed the ‘Use Credit Wisely’ training!
Consumer Action: Use Credit Wisely