What is Credit? Credit is an arrangement to receive cash, goods, or services now and pay for them in the future. Consumer credit is the use of credit.

What is Credit?Credit is an arrangement to receive cash,

goods, or services now and pay for them in the future.

Consumer credit is the use of credit for personal needs.

What are Credit Cards?Pre-approved credit which can be used for the

purchase of items now and payment of them later.

The average household receives five credit card offers per month in the mail, and more by telephone and the Internet.

Remember, that the average household in the United States carries over $8, 400.00 in credit card debt.

Why Use a Credit Card?Proper use can help establish a good

credit rating (FICO Score)Conveniently accepted across the United

States and around the worldEmergency buying powerAdditional form of identificationRecord of purchases on bill statementOften required to hold a reservation

Why Not Use a Credit Card?Improper use can damage credit rating (FICO

Score)Higher risk for impulsive buying and overspendingDebt trap when used unwiselyExpensive way to borrow due to high interest ratesLess to spend in the future due to paying off

purchases from pastPossible hidden fees & surchargesPrivacy is an increasing concernIdentity theft easier

Types of Credit Card AccountsRevolvingChargeSecuredSub-PrimeWe will briefly discuss these four types of

credit cards over the next few slides.

Revolving Credit CardsCredit line can be used up to the credit

limitPay charges in full each month, pay just

the minimum, or make a partial payment greater than the minimum due

Available credit goes up and down as purchases and payments are made

Most credit cards are revolving credit cards

Charge Credit CardsPay all charges in full every month by the due

dateCannot carry a balance No balance = no interestA regular issue American Express Card is an

example of a charge credit card.

Secured Credit CardsGuaranteed by money deposited in an

account Credit limit usually equals the amount of the

depositCan be used by people with credit problems to

reestablish good credit

Sub-Prime Credit CardsMarketed to people who have poor credit

Typically have very low lines of credit, large upfront fees and high interest rates

Understanding the Credit Card Billing StatementSome Important Terms Include:Minimum Payment Due: minimum amount

to be paid Past Due Amount: the previous amount

due which was not paid before the due date

Due Date: the day by which the company requires a payment to be made

New Balance: the total amount owed on a credit card

ContinuedCredit Line: the maximum amount of charges

allowed to an accountClosing Date: last day for transactions to be

reported on the statementCharges, Payments, and Credits: the transactions

which occur with the use of a credit cardFinance Charge: charges assessed for credit card useGrace Period: The time between the close of the billing

cycle and the payment due dateRemember, if you do not carry a balance from the last

credit card bill, interest will not be charged on purchases if the new bill is paid in full by the due date (This is the most important thing to remember concerning credit card usage! Pay off the bill in full and never pay interest to the credit card company!)

Using a Credit Card Properly Only use when there is no doubt about ability

to pay-off the charges at the end of the billing cycle

Record all expenses and keep receipts Check credit statement for errors Always pay off balance completely and timely

!

Credit Card Safety TipsSign card with signature or “Please See ID”Do not leave cards lying aroundClose unused accounts in writing and by phone,

then cut up the cardDo not give out account number unless making

purchasesKeep a list of all cards, account numbers, and

phone numbers separate from cardsReport lost or stolen cards promptly

Are Debit Cards a type ofCredit Card?Debit Cards are: Not the same as credit cards Not a form of credit at all Directly linked to your bank account