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Credit Cards and Loans

Credit Cards and Loans. Types of credit. Types of Credit. There are many different sources of credit These sources have loans of varying lengths. Banks loose up to $1.5 million dollars a year in credit card fraud alone. This is why having good credit is so important

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Credit Cards and Loans

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  1. Credit Cards and Loans Types of credit

  2. Types of Credit There are many different sources of credit These sources have loans of varying lengths. Banks loose up to $1.5 million dollars a year in credit card fraud alone. This is why having good credit is so important The better credit rating you have the less interest you will be pay. This saves you money in the long run

  3. Charge Accounts • An account offered by dealers or stores. • Usually a short-term or medium-term loan • Regular Charge Accounts: requires you pay the full amount within a certain amount of time. • Revolving Charge Accounts: allows you to borrow money and pay back a part of the total or the entire balance for each month. • Budget Charge Accounts: let you buy large ticket items and spread out the payments over time

  4. Credit Cards • Come from many different sources, it’s important to shop around for the best card for you • Many cards have annual fees ranging from $25-$100 • There are three basic types of credit cards: • Single-Purpose • Multipurpose • Travel and Entertainment

  5. Single Purpose Card This cards can only be used to buy goods or services at the particular business that issued that card. You receive statements monthly stating your charges. You can choose to pay the entire amount or make a payment (usually better to pay entire amount of single purpose if able) There is no annual fee for single purpose cards

  6. Multipurpose Cards Also known as bank credit cards. Usually issued by banks, but can be owned by major credit card companies Mastercard, and Visa are examples of multipurpose cards You can use these cards for many different reasons and all over the world. Some may have annual fees, others may not. You need to shop around

  7. Travel and Entertainment These work like regular charge accounts You must pay the full amount due every month American Express and Diners Club are examples of these types of cards. Accepted worldwide for many different purposes. Often have an annual fee, which can be much higher than a multipurpose card

  8. Loans • Banks and other financial institutions offer many different types of loans • They usually have the best interest rates, but have more demands • Three major types of loans: • Single Payment Loan • Installment Loan • Mortgage Loan

  9. Single Payment Loan Debtor pays back the loan in one payment The total paid in the end will be the amount loaned plus however much interest was earned in the time period that the loan was taken. Farmers use this type of loan frequently.

  10. Installment Loans Probably the most common type of loan Student loans, personal loans and home improvement loans are examples Repaid in regular payments over time. Payments include a set amount from the amount owed plus the interest accumulated for that particular month

  11. Mortgage Loan A form of installment loan, however it’s for a long period of time The most common loan terms for a mortgage is 15 years and 30 years. The debtor makes regular (usually monthly) payments. Some loans require collateral if payments aren’t made regularly.

  12. What Happens If You Run Out of Money? • If you have trouble making it from paycheck to paycheck there are some options for short-term payroll advance loans • Pawnshop Loan • “Borrow Until Payday” Loan • These can be very expensive since they are such a high risk

  13. Pawnshop Loans It’s based on the value of something you own. If you pawn your tv you will get an amount of money that is less than what the tv is worth. You get a certain period of time to either redeem or buy back your tv There are service charges for the pawn shop to hold your merchandise for you. If you don’t redeem the tvin the time period, the shop has the right to sell it. The cost of this loan is VERY high

  14. Borrow Until Payday Loan Some businesses provide very short loans The cost is EXTREMELY high…up to 1,000 percent on an annual basis Not permitted in some states and limited in other states by a max fee or loan amount Made without a credit check Strongly recommend NOT using this type of loan

  15. Comparing Credit • Research at least of each type of credit card • Look at interest rates • Credit lines • Annual Rates • Repayment terms • Application Process • Compare and contrast all the cards • Prepare to present the information on the cards and explain which card you would choose and why. • What are some interesting things you noticed about these cards or the application process?

  16. Homework • Obtain a credit card application from at least two different retail stores or companies. • Also for the next week save all advertisements and junk mail that come in the mail that try to persuade you and your family to become a user of their credit card or credit accounts. • Log all the promotional offers that are advertised. • Bring them to class so we can discuss them • Conduct a mini survey. Ask family and friends and find out whether or not they would choose to sign up for those cards based on the advertising material. Why or why not?

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