Dealing the Cards of Credit Credit cards No set time to be paid back May pay in full, part, or...
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Transcript of Dealing the Cards of Credit Credit cards No set time to be paid back May pay in full, part, or...
Credit cards
No set time to be paid back
May pay in full, part, or minimum payment
No finance charge if bill paid in full
Advantages of Using Credit Cards
Establish credit history Use of item now Safety Convenience Emergency funds Spending record Consumer protection
Disadvantages of Using Credit Cards
Tend to overspend
Credit history damaged if misused
Card fees (annual, late)
Interest (APR)
Can be lost or stolen
Risk of fraud
Pre-paid Credit Cards
Deposit money into your credit card account
Use anywhere your credit card company is accepted
Once the money is spent, need to add more
Cash Advance Facts
Know the Cost of Cash Advances
Interest begins immediately
Service fee applies
Purchase APR vs. cash advance APR
Grace Period
Time period before interest is charged
Typically 10 to 25 days
Not offered if unpaid balance on card
Not offered on cash advances
Maximum Debt Load
Credit Payments =
no more than 15-20% of take-home pay
(includes credit cards, auto loans, student loans, etc.)
Rule of Thumb
Total Debt
10% of Net Income
# of years to pay off debt
Should Equal No More Than 2 or 3 years to Pay Off Debt
=
Smart Use of Credit Cards
Develop system for paying
Save receipts
Pay card in full
Avoid “no minimum payment due”
Avoid “endless” repayment periods
Loan Amount - $1,000
Interest Rate 19.8%
Monthly Payment 3% of balancenot less than $15
# Years to Pay 8.3
Total Finance Charge $843
Loan Amount - $1,000
Loan A Loan B Loan
C
Interest Rate8.5% 14% 19.8%
Int. Paid 1st Yr. $75.06 $126.72 $183.95
Yrs. to Pay Off 5.75 yrs. 6.7 yrs. 8.3 yrs.
To Reduce Fraud
Never lend your credit card
Never leave receipts lying around
Shred old receipts and bills
Shred unwanted credit card offers
Do not sign a blank receipt
And…
Keep sight of your card
Know how to correct errors
Be careful over the phone
Report lost or stolen card immediately
Use credit card on secure Internet sites only
Credit Trouble
Warning Signs
Only able to make minimum payment
Credit needed for daily expenses
Borrowing to pay for existing debts
Can’t pay bills on time
More Signs
Spending up to credit limit
Calls from creditors
No savings
Don’t know how much you owe
Stressed about bills
Misuse of credit cards can…
Damage credit history
Damage chances of getting future credit
Make it difficult to find a place to live or get a job
Result in bankruptcy
Cause stress