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USE CREDIT WISELY. Consumer Action created this project in partnership with. Advantages of Credit. What can credit do for you? Help you through a financial emergency Enable you to pay for a purchase over time Provide a short, interest-free loan Enable you to rent a car, hotel room, etc.

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use credit wisely

Consumer Action created this project in partnership with

advantages of credit
Advantages of Credit
  • What can credit do for you?
  • Help you through a financial emergency
  • Enable you to pay for a purchase over time
  • Provide a short, interest-free loan
  • Enable you to rent a car, hotel room, etc.
  • Offer convenience, security when shopping
  • Rebates or rewards
  • Allow you to avoid carrying cash
  • Allow you establish credit/build good credit
types of credit
Types of Credit

Installment Credit

  • Fixed number of monthly payments
  • Car loans, mortgages

Revolving Credit

  • Short-term, open-ended
  • Assigned credit limit
  • Available credit fluctuates as you make purchases & payments
  • Option to make full or partial payment
  • HELOCs, credit cards
card types
Card Types

Credit, charge & debit cards

  • Visa, MasterCard, Discover
    • Affinity cards
    • Rewards cards
    • Secured cards
  • Retail and gas cards
  • Stored value (prepaid) cards
  • Charge cards
  • Debit cards
credit card terms
Credit Card Terms
  • Credit limit
  • Method of computing the balance
  • Minimum payment
  • Payment due date
  • Grace period
  • Interest rate
  • Fees
credit card terms interest
Credit Card Terms: Interest
  • The lender’s fee for allowing you to use its money
  • Expressed as a percentage of the credit
  • Fixed vs variable interest rate
  • Annual percentage rate (APR)
  • Periodic interest rate
  • Different rates for a single card:
    • Teaser
    • Cash advance
    • Purchase
    • Penalty/Default
    • Balance transfer
    • Effective interest
credit card fees
Credit Card Fees
  • Application fee
  • Annual fee
  • Balance transfer fee
  • Cash advance fee
  • Currency conversion fee
  • Late fee
  • Overlimit fee
  • Bounced check/returned item fee
  • Miscellaneous fees
activity credit card jeopardy
Activity: Credit Card Jeopardy
  • Break into three groups
  • Choose one person on your team to “buzz” in when you think you have the correct “question” to the answer
  • A correct answer earns the point. An incorrect answer loses a point and allows another team to “steal” the point.
  • Remember to phrase your answer in the form of a question.
credit card billing statements
Credit Card Billing Statements
  • Opening/closing date
  • Past due amount
  • New balance
  • Minimum payment due
  • Due date
  • Account summary
  • Transactions
  • Rewards information
  • Explanation of finance charges
  • Effective APR
food for thought
Food for Thought
  • In 2007, credit card customers who revolved their debt (didn’t pay the balance in full each month) paid $18.1 billion in penalty fees to credit card companies.

Source: “Don’t Get Clobbered By Credit Cards,” by Gary Weiss

comparing credit cards
Comparing Credit Cards
  • Credit limit
  • Purchase APR
  • Balance transfer APR
  • Cash advance APR
  • Promotional APRs
  • Penalty APR
  • Variable-rate info
  • Grace period
  • Annual fee
  • Transaction fees
  • Penalty fees
  • Balance computation method
  • Minimum finance charge
  • Rewards
obtaining credit
Obtaining Credit
  • Pre-approved offers
  • Invitations to apply
  • Instant credit
  • Consumer-initiated application
    • Banks, credit unions, retailers, card companies, and other institutions
  • Compare offerings, terms
using credit wisely
Using Credit Wisely
  • Know your credit limit and don’t exceed it
  • Charge only as much as you can repay
  • Pay more than the minimum, if possible
  • Pay by your due date (and time!)
  • Use a debit card, not a credit card, to get cash
  • Don’t accumulate too much debt
  • Avoid penalty fees and rates
  • Consider optional fee-based services carefully
  • Contact a credit counselor ( or