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Credit Management. Unit 4. Credit in America. Chapter 16 . FUN FACTS. In 2006, the credit card industry took in $55 billion in credit card fees and $90 billion in finance charges. Makes you want to pay your credit card bills on time. 10\% - Credit Cards

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credit in america
Credit

Management

Unit 4

Credit in America

Chapter 16

fun facts
FUN FACTS
  • In 2006, the credit card industry took in $55 billion in credit card fees and $90 billion in finance charges. Makes you want to pay your credit card bills on time.10% - Credit Cards
  • U.S. consumers racked up an estimated $51 billion worth of fast food on their personal credit and debit cards. That is equal to 10.2 Billion Big Mac meals, 3 billion pounds of fries and 1.7 billion gallons of coke.Owes about $230
  • U.S. Visa cardholders alone conduct more than $1 trillion in annual volume. Average Family: $9,000
  • Average Household Credit Card Debt is $8,400.00
certain terms are commonly used to describe credit its availability and its cost
Certain terms are commonly used to describe credit, its availability and its cost.
  • Borrower: or debtor: When you borrow money or used credit
  • Creditor: The person or company who loans money or extends credit to you
  • Capital: is property you possess(bank accounts, investments, other assets)
  • Collateral: is property pledged to assure repayment of a loan.
  • Line of Credit: Pre-established amount that can be borrowed without collateral
slide4
Once you have completed the credit purchase, you owe money to the creditor.

Principal: amount borrowed

Balanceddue: is the amount borrowed plus interest for the time you have the loan

FinanceCharge: total dollar amount of interest and fees you pay for the use of credit.

finance charges
FINANCE CHARGES
  • Minimumpayment: the least amount you may pay that month under your credit agreement.
  • DueDate: credit payments are due on a specific date or you will be charged a late fee
  • Latefee: charged to a balance if you do not pay within a certain time
  • Securedloan: you agree to repay entire debt or goods will be returned at end of a time
advantages of credit
Advantages of Credit
  • Able to buy needed items now
  • Don’t have to carry cash
  • Creates a record of purchases
  • More convenient than writing checks
  • Consolidates bills into one payment
disadvantages of credit
Disadvantages of Credit
  • Interest (higher cost of items)
  • May require additional fees
  • Financial difficulties may arise if one loses track of how much has been spent each month
  • Increased impulse buying may occur
kinds of credit
Kinds of Credit
  • Open-Ended Credit
    • Can be used over and over again pending customer agreement
    • Open 30-Day accounts
      • Travel-entertainment cards (American Express and Diner’s Club)
      • Widely Accepted nationwide and overseas
      • Have high or no credit limits
      • Provides instant purchasing power
kinds of credit1
Kinds of Credit
  • Revolving Credit Accounts
    • All purpose credit card: Visa, MasterCard, and Discover
      • Widely accepted nationwide and overseas
      • Provide instant purchasing power
    • Retail store cards: department stores and gas companies
      • Only accepted at participating stores
      • Provide instant purchasing power
applying for a credit card
Applying for a Credit Card
  • Costs:
    • Annual Percentage Rate (APR)
    • Grace period (free period)
    • Annual Fees
    • Transaction Fees
    • Balancing computation method for the finance charge
  • Features:
    • Credit limit
    • How widely the card is accepted
    • What services and features are available
kinds of credit2
Kinds of Credit
  • Open-Ended
  • Closed-Ended Credit
    • A loan for a specific amount of time that must be repaid, in full, including all finance charges, by a stated due date.
    • Very expensive items: cars, furniture, and major appliances.
    • Statement includes: Amount loaned, finance charges, payment amount.
    • Collateral
  • Service Credit
      • Have a service performed now and pay for it later
      • Examples: Phone, utilities, doctors, and lawyers
      • Terms are set by individual businesses
      • Usually paid in full with no finance charges or a budget plan
sources of credit
Sources of Credit
  • Retail Store
  • Credit Card Companies
  • Banks and Credit Unions
  • Finance Companies
  • Pawnbrokers
  • Private Lenders
  • Other Sources of Consumer Credit
credit cards do s and don ts
Credit Cards Do’s and Don’ts
  • Shop around
    • Look at various sources.
  • Read and understand the contract
    • Read the contract carefully
    • Don’t rush into signing anything
    • Once a contract is signed, get a copy of it.
    • Know the penalties for missed payments
  • Know your cost
    • Figure out the total price when paying with credit.
    • Make the largest payments possible
    • Know the penalties for missed payments
    • Buy on installment credit only after you have evaluated all other possibilities.
    • Don’t be misled into thinking small payments will be easy.
slide17
This central site allows you to request a FREE credit report, once every 12 months from each of the nationwide consumer credit reporting companies. Equifax, Experian, and TransUnion.
credit rating and report1
Credit Rating and Report
  • Summary of Information
  • Public Record Information
  • Credit Information
  • Account Detail
  • Requests for Credit History
  • Personal Information
consumer protection
Consumer Protection
  • Truth in Lending Act (1968)
    • Ensures consumers are fully informed about cost and conditions of borrowing.
  • Fair Credit Reporting Act (1970)
    • Protects the privacy and accuracy of information in a credit check.
  • Equal Opportunity Act (1974)
    • Prohibits discrimination in giving credit on the basis of sex, race, color, religion, national origin, marital status, age, or receipt of public assistance.
  • Fair Credit Billing Act (1974)
    • Sets up a procedure for the quick correction of mistakes that appear on consumer credit accounts.
  • Fair Debt Collection Practices Act (1977)
    • Prevents abuse by professional debt collectors, and applies to anyone employed to collect debts owed to others; does not apply to banks or other businesses collecting their own accounts.
card act
CARD ACT
  • On Feb. 22, 2010, the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) took effect.
  • It is a comprehensive credit card reform legislation that aims to establish fair practices relating to the extension of credit under an open end consumer credit plan.
      • New rules credit card companies must follow to ensure CONSUMER PROTECTION.
  • Provisions include: Interest rates, due dates, misleading terms, set limits, minimum payment explanation
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