Transcript Document 7400448

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Single Payment –Items or service are paid for
in a single payment, within a given time
period.
Usually does not carry interest
 Utility companies and some retail businesses
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Installment Credit – Merchandise and services
are paid for in two or more regularly scheduled
payments of a set amount
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Interest is charged
Car loans, appliance dealers
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Revolving Credit – Many items can be bought
using this plan. Repayment is made at regular
time intervals for any amount at or above the
minimum required amount
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Interest is charged on the outstanding balance
Issued by retail stores and most financial institutions
AKA credit cards
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Secured credit – the amount of credit is
“secured” by an asset that would be sold by the
creditor upon default (non payment)
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Unsecured credit – the amount of credit
extended is only secured by the borrower’s
willingness and ability to pay
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Car loan, mortgage
Most credit cards
Secured credit carries a lower interest rate than
unsecured credit.
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Comparison shop
credit cards
Don’t take the first
offer that comes to
you:
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Pre-approval
 Means nothing
 No special rates
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Written statement
that gives the terms
and conditions of a
credit card account.
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Look here for all info
before signing up
Required by Federal
Reserve
Card issuers can
change terms at any
time with 15 days
notice
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The monthly bill sent by
a credit card issuer to
the customer.
It gives a summary of
activity on an account.
Important changes to a
credit card account are
included in small-print
fliers that are sent with
the statement.
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Schumer box: Important
to look here once you’ve
selected a card.
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Annual Percentage Rate
(APR)
Interest
F (Fixed) rate
V (variable) rate
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Prime + ___
Libor + ___
Won’t go below floor
Introductory rate
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How long?
What will the rate
“go to” afterwards?
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Interest-free time
between:
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Transaction date
Billing date
Usually 20 – 30 days
No grace period if:
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Carry a balance
No stated grace
period
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Average Daily
Balance
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Most common
Calculated by totaling
each days balance,
dividing by the
number of days in the
billing cycle and
multiplying by the
periodic rate
(APR/12)
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Two Cycle Billing
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Finance charge is
calculated on the
average daily balance
over the last two
billing periods
Ends up costing more
than ADB if you
don’t pay your
balance in full
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The maximum amount
you can charge on a
credit account.
You're approved up to
$25,000!
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“Up to” is the key phrase
Enticement offer
Actual credit limit based
on credit score
Recommended limit
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20% of net income
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Default
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A designation that
indicates a person has
not paid a debt that
was owed.
Universal default
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If you are more than
30 days late on a
payment to anyone,
your credit card
company can raise
your interest rate.
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How your payments
will be applied when
you have differing rates
Matters when you:
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Use card during and after
promotional period
Purchases and cash
advances
Payments will pay off
lower rate first
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Costs you money. Makes
the bank money.
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Paying for the
privilege of using a
credit card
Many cards offer
rewards without an
annual fee
Weigh cost of
annual fee to value
of reward
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Mileage
Avoid annual fees
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Charge imposed for not
paying on time
Know your payment
due date & time
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9 a.m.
12 noon
5 p.m.
11:59 p.m.?
Pay via U.S. mail,
phone, online,
automatic bill pay, etc.
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You can exceed your
credit limit but it
will cost you
Fee
 Higher interest rate
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Credit Cards have
replaced traveler's
checks.
Fee will be
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Flat amount
Percentage of
withdrawal
Important only if
you travel
internationally
frequently
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Don’t take cash
advances
Fee
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Flat amount
Percentage of withdrawal
Cash advance interest
rate is always higher
and has no grace period
Payments are applied to
lower-interest balance
first
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Balance Transfer
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The process of
moving an unpaid
credit card debt from
one issuer to another
Cards charge to
transfer balance to
or from one card to
another.
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Also called “No
Balance Fee”
Fee charged for
using the credit card
even when you pay
off the balance in
full every month.
Don’t select this card
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$1.50 * 12 = $18
Similar to an annual
fee
•Credit Card Insurance
•Theft Insurance
•Life & Disability Insurance
•Unemployment Insurance
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Federal laws designed to protect consumers
and insure equal access to credit
Fair Credit Reporting Act (1971)
 Fair Credit Billing Act (1975)
 Fair Debt Collection Practices Act (1978)
 Equal Credit Opportunity Act (1975)
 Truth in Lending Act (1969)
 Fair Credit and Charge Card Disclosure Act (1989)
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Covers the reporting of debt repayment
information
Requires the removal obsolete information (7 to 10
years old)
 Consumer access to credit report information and to
dispute incorrect information
 Requires credit bureau and information provider to
correct errors
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Applies to all open-end credit accounts
Consumers should send a written billing error notice
to creditor within 60 days after receipt of bill
 Creditors must acknowledge within 30 days
 No negative impact on consumer credit rating while
dispute is pending
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Prohibits debt collectors from engaging in
unfair, deceptive, or abusive debt collection
practices
Collectors must send written notice that includes the
amount and creditor
 Collectors must identify themselves on the phone
and only call between 8 am and 9 pm unless a
consumer agrees to another time
 Collectors must not call consumers at work
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Prohibits discrimination on the basis of gender,
race, marital status, religion, national origin,
age, or receipt of public assistance
Consumers have a legal right to know why
they are denied credit
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Mandates disclosure of information about the
cost of credit
Schumer box information as required in the Fair
Credit and Charge Card Disclosure Act
 Provides for criminal and civil penalties for
violations
 Protects consumers against unauthorized use of
credit cards
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 $50 maximum exposure for lost or stolen card
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Will go into effect on July 1, 2010
Consumers will receive 45 days notice of
changes to their terms and conditions
Consumers will have 45 days notice of a rate
increase due to non payment
Cut off times for mailed in payments will be
5:00pm
Payments will be allocated to those items
carrying the highest rate of interest
Two cycle billing will be eliminated
 Credit card statement will be reformatted to be
more understandable
 Fees will be eliminated on subprime credit
cards, which had reduced the amount of
available credit
These changes were adopted by the Federal
Reserve Board of Governors, the Office of
Thrift Supervision and the National Credit
Union Administration
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