Applying for credit
This presentation is the property of its rightful owner.
Sponsored Links
1 / 19

Applying for Credit PowerPoint PPT Presentation


  • 79 Views
  • Uploaded on
  • Presentation posted in: General

Applying for Credit. Chapter 26.1. OBJECTIVES. Explain how you can develop a credit history Examine factors to consider when deciding which credit card to secure Define three factors that creditors consider when granting credit. THE MAIN IDEA.

Download Presentation

Applying for Credit

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Applying for credit

Applying for Credit

Chapter 26.1


Objectives

OBJECTIVES

  • Explain how you can develop a credit history

  • Examine factors to consider when deciding which credit card to secure

  • Define three factors that creditors consider when granting credit


The main idea

THE MAIN IDEA

  • Developing a credit history is important

  • The first step will be choosing a credit card and applying for it

  • Before deciding to issue credit to a customer, a creditor looks at the applicant’s

    • Capacity

    • Character

    • Capital


Developing a credit history

DEVELOPING A CREDIT HISTORY

  • Using credit responsibly can make life easier

  • Using credit in an irresponsible way will harm the ability of a consumer to make future purchases


Developing a credit history1

DEVELOPING A CREDIT HISTORY


Selecting a credit card

SELECTING A CREDIT CARD

  • There are five main factors to consider when selecting a credit card:

    • Interest rate

    • Extra fees

    • Whether the interest rate will change

    • Whether a cosigner is needed

    • Whether there is a grace period


Selecting a credit card1

SELECTING A CREDIT CARD

  • Questions you should ask before selecting a credit card include:

    • What will the cost of credit be?

    • Who will accept the card?

    • What is the credit limit?

    • Will I be able to use the card to get cash?


Cost of credit

COST OF CREDIT

  • For all their conveniences, credit cards come with costs such as interest rates and various fees

  • To gauge the cost of credit, first look at the annual percentage rate (APR)

Annual Percentage Rate (APR)

the cost of credit on a yearly basis


Cost of credit1

COST OF CREDIT

  • A credit card might offer a low introductory APR but change to a much higher rate after a few months

  • Credit card companies will usually charge a fee for a cash advance

Cash Advance

a loan given in cash by a credit card company in anticipation of the borrower’s being able to repay it


Cost of credit2

COST OF CREDIT

  • Credit card companies will usually charge a fee for late or missed payments

  • Another fee is charged if the card holder is over their credit limit


Other considerations

OTHER CONSIDERATIONS

Cosigner

someone who agrees to be responsible for a debt if the main applicant does not repay it

  • You may need a cosigner when you apply for credit.

  • You should consider whether there is a grace period for payments on your credit card.

Grace Period

an amount of time allowed to repay a debt without having to pay interest charges


Applying for credit1

APPLYING FOR CREDIT

  • A credit card application asks for information about your address, your job, what other credit you have, and details about your income and savings


Creditworthiness

CREDITWORTHINESS

  • Before creditors give a consumer a charge or credit account, they want to make sure the consumer is worth the risk


The three cs of creditworthiness

THE THREE Cs of CREDITWORTHINESS

C

Capacity:An applicant’s ability to pay.

The Three Cs of Creditworthiness

Character:An applicant should be trustworthy.

C

Capital:The money an applicant has beyond debts.

C


Credit limits

CREDIT LIMITS

  • Creditors also consider capacity, character, and capital when determining a card holder’s credit limit

  • If a person pays his or her bills on time, most creditors will raise the person’s credit limit

Credit Limit

the maximum amount a card holder can charge on a credit card


Making the minimum payment

MAKING THE MINIMUM PAYMENT

  • Consumers who pay more than the minimum amount each month will pay less interest and pay off their debt more quickly

  • The credit card agreement is a contract

  • If a consumer does not make at least the minimum payment, the consumer is not meeting his or her legal obligation


Review questions

REVIEW QUESTIONS

  • How can a consumer develop a credit history?

    Apply for credit, be approved, use the credit, and make payments to the creditor


Review questions1

REVIEW QUESTIONS

2. What is an annual percentage rate? Why is it important?

The cost of credit on a yearly basis; it determines the amount of interest that a consumer will pay on a debt


Review questions2

REVIEW QUESTIONS

3. What are the three Cs of credit?

Capacity, Character, and Capital


  • Login