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Introduction

• Instructor and student introductions.

• Module overview.

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Student Introductions

• Your name.

• Your expectations, questions and concerns about credit cards.

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Purpose

Charge It Right will teach you about credit cards and how to use them responsibly.

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Objectives

By the end of this course, you will be able to:

• Describe the purpose of credit cards.

• Determine which credit card is best for you.

• Identify the factors creditors look for when making credit decisions.

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Objectives (Continued)

• Describe how to use a credit card responsibly.

• Identify the steps to take when a credit card is lost or stolen.

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Agenda and Ground Rules

• 90 minutes long

• One 10-minute break

• Training methods

• Classroom participation

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Credit Cards

Credit cards:

• Are a convenient form of borrowing.

• Give you a revolving line of credit.

• Require a minimum payment each month.

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Other Cards

• Cash cards

• Smart cards

• Stored value cards

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Secured and Unsecured Cards

• You do not have to provide “collateral” in order to get a credit card.

• A credit card is an “unsecured” loan.

• You can get a “secured” credit card if you have no credit history or a negative credit history.

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Gold and Platinum Cards

These cards:

• Have a higher credit limit.

• Require good credit history and higher income.

• May not have favorable terms.

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Reward Cards

These cards:

• Are offered by hotels and airlines.

• Charge an annual fee.

• May give you cash rebates

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Pre-approved Card Offers

• Credit card companies look at your credit report and determine that you MIGHT qualify for the interest rates and credit limit being offered.

• Whether or not you get the best terms depends on your income, employment, and credit history.

• Shop for the best terms.

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Credit Card Terms

Annual percentage rate (APR)

Fees

Grace period

Balance computation method

Cash advance

Balance transfer

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Annual Percentage Rate

Interest rate + fees = APR, expressed as a yearly percentage rate

• APRs are either fixed or variable.

• Penalty APRs are about 52 percent higher than regular APRs.

• Credit card companies must state how long “introductory” APRs last.

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Fees

• Annual fees

• Late fees

• Over-the-limit fees

• Balance transfer fees

• Cash advance fees

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Grace Period

The number of days you have to pay your balance before the credit card company starts charging interest.

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Balance Computation Method

• The balance computation method will determine how your interest is calculated.

• The most common method used is the average daily balance.

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Cash Advance

The ability to get cash from your credit card.

• Credit card companies charge a fee for this service.

• Example: 2%/$10 The cash advance fee is 2 percent of the cash advance amount or $10, whichever is greater.

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Balance Transfer

• Balance transfer is the process of moving unpaid credit card debt from one credit card to another.

• Credit card companies sometimes offer low rates to encourage balance transfers coming in.

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Other Factors to Consider

• Customer service

• Additional protection

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Application Requirements

• Individual credit – based on the assets, income, and credit history of the individual

• Joint credit – based on the assets, income, and credit history of both people who apply.

• Age requirement – 18 years old

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Credit Report

A credit report is a record of how you have paid your debts. It tells lenders:

• Who you are.

• How much debt you have.

• Whether you have made payments on time.

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Credit Report (Continued)

• Whether there is negative information about you in public records.

• Inquiries made about you.

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Credit Reporting Agencies

• Equifax

• Experian

• TransUnion

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Credit Score

The credit score:

• A number that predicts how much of a credit risk you will be.

• Calculated based on information in your credit report.

Check your credit score before applying for new credit.

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FICO Score

• Scores range from about 300 to 900.

• Takes into account:– Past payment history – 35 percent– Outstanding debt – 30 percent– How long you've had credit – 15 percent– New applications for credit – 10 percent– Types of credit – 10 percent

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VantageScore

• Was introduced in March of 2006.

• 3 credit reporting agencies use the same scoring system.

• Scores range from 501 – 990.

• A, B, C, D, F

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Denial Notice

Lists the reasons for denying credit, such as:

• You have a bad credit history.

• You have not been at your current address or job long enough.

• Your income does not meet the creditor’s criteria.

Also called an “adverse action” notice.

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Lost or Stolen Credit Card

• Be careful giving personal information over the telephone or on the Internet.

• Immediately notify your credit card company if your card is lost or stolen.

• If you think you are a victim of credit card fraud, immediately contact your credit card issuer.

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Credit Limit

• This is the maximum amount of money the credit card company is loaning you.

• If you go beyond this limit, the credit card company will assess an over-the-limit fee.

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Item Price APRInterest

Paid

How Much You

Really Pay for the Item

Total Years to Pay

Off

TV $500 18% $216 $716 5

Computer $1,000 18% $516 $1,516 7

Furniture $2,500 18% $1,415 $3,915 10

Cost of Making the Minimum Payment

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Original Balance

APRMonthly

Payments

Total Number

of Monthly

Payments

Total Years

to Pay Off

Total of Payments

$2,500 18%Minimum Payment

(MP)123 10 $3,915

$2,500 18% MP + $25 50 4 $3,258

$2,500 18% MP + $50 33 3 $2,839

Benefit of Making More Than the Minimum Payment

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Original Balance

APRMonthly

Payments

Total Number of

Monthly Payments

Total Years

to Pay Off

Total of Payments

$1,000 18%Minimum Payment

(MP)87 7 $1,516

$1,000 18% MP + $25 26 2 $1,187

$1,000 18% MP + $50 16 1 $1,119

Benefit of Making More Than the Minimum Payment

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Credit Card Statement

• The front of the statement lists detailed activity during the account billing cycle.

• The reverse side describes some basic terms of your credit card agreement, including how the interest is calculated and where to call with billing questions.