Credit

Cards and Credit Safety

What are the dierent types of credit available in our
economic system?

What are the pros & cons of
credit cards and other credit lines
 What is credit?
Credit is a legal
agreement to receive
cash, goods, or services
now and pay for them
in the future.
Started in the Middle
Ages (1300s)
By the 1960s, formal
reports created based on
past history (social)
Middle Ages Trade Unions (1300s)
What types of credit are available in
our economic system?
Several types
Credit Cards
Installment
Loans
Revolving Credit
Student Loans
 Did You Know?
Is the number of undergraduate students carry credit cards rising or
falling?
The percentage of undergraduate students carrying at least 1
credit card has risen 24% since 1998

Are most college students waiXng Xll they are closer to graduaXon to
get a credit card?
92% of college students have a credit card by their sophomore
year

On average, most college students only have (1) credit card (T or F)

Almost half (47%) of all college students carry four or more
credit cards

On average, how much does the average college student owe on
their credit cards?
21% of undergrads owed between $3000 & $7000 on their credit card a 61%
increase from 2000

 What are credit cards?
Credit cards are pre-
approved sources of
credit which can be
used for the purchase
of items now and
payment of them later
First created in 1958
Widely available by the
1980s

Have become
increasing popular and
controversial since the
1960s
The First MenXon of Credit Cards

Edward Bellamy
Charge Coins & Medals (1800s 1930s)
Early Credit Cards (1950s)
Todays Credit Cards (1980s present)
 Why would credit cards be a`racXve
to some consumers?
Number of reasons:
Proper use can help establish
good credit raXng
Conveniently accepted across
United States and abroad
Emergency buying power
AddiXonal form of idenXcaXon
Record of purchases on bill
statement
Oeen required to hold a
reservaXon
 What types of credit cards are available?

Three (3) major types:

Bank Credit Cards:
issued by nancial
insXtuXon
Credit is issued by
service provider (Wells
Fargo Visa card)
Balance paid-o at end
of month or extended
over period of Xme
 What types of credit cards are available?

Three (3) major types:

Travel / Entertainment
Credit Cards
Credit and card issued by
service provider (Diners
Club)
Not accepted at as many
locaXons as bank cards
EnXre balance must be
repaid in 30 days
 What types of credit cards are available?

Three (3) major types:

Retail Credit Cards
Credit and card issued by
parXcular retailer (Old
Navy, The Bon, Home
Depot, Shell Oil)
Balance paid-o at end
of month or extended
over period of Xme
 How does some go about genng a credit card?
1. Applicant completes a credit
applicaXon
2. Lender conducts a credit
invesXgaXon
3. Applicant is given a credit raXng
4. Lender accepts or denies the
credit request
5. If accepted, applicant evaluates
the credit card details (SCHUMER
BOX)
6. Applicant accepts or refuses
credit terms
 What is the Schumer Box?
The Schumer Box is an
easy to read box on all
credit card applicaXons
that lays out the cards
costs
Named for New York
Sen. Chuck Schumer (D)
Part of an update to the
Federal Truth in Lending
Act (1989)
 A Schumer Box and Credit Card Terms Explained

Annual Balance
Percentage Grace Minimum Calculation Annual Fees Transaction Late
Rate for Period for Finance Method for Fees for Payment
Purchases Purchases Charges Purchases Cash Fees
Advances
Average daily
$.50 when a balance 2% with a
19.9% Not less finance charge method $20 per year minimum fee $29
than at a periodic (including of $3
25 days rate is charged new
purchases)

Annual Percentage Rate (APR): interest rate charged

for amount borrowed in terms of percentage per year

Grace Period: amount of Xme allowed before nance
charges (interest or cost of credit) are applied
 A Schumer Box and Credit Card Terms Explained

Annual Balance
Percentage Grace Period Minimum Calculation Annual Fees Transaction Late
Rate for for Finance Method for Fees for Payment
Purchases Purchases Charges Purchases Cash Fees
Advances
Average
$.50 when a daily 2% with a
19.9% Not less than finance balance $20 per year minimum fee $29
25 days charge at a method of $3
periodic rate (including
is charged new
purchases)

Minimum Finance Charge: minimum amount

charged for card use
Balance Calcula;on Method: method used to
determine balance including nance charges
 A Schumer Box and Credit Card Terms Explained
Annual Balance
Percentage Grace Period Minimum Calculation Annual Fees Transaction Late
Rate for for Finance Method for Fees for Payment
Purchases Purchases Charges Purchases Cash Fees
Advances
Average daily
$.50 when a balance 2% with a
19.9% Not less than finance charge method $20 per year minimum $29
25 days at a periodic (including fee of $3
rate is charged new
purchases)

Annual Fees: yearly charge for credit card

ownership
Cash Advance Transac;on Fees: cash
withdrawal fees
Late Payment Fees: penalty fee for payments
not made by the due date
 How should you use credit cards properly?

Few SuggesXons:
Only use when there is no
doubt about ability to pay-
o the charges at the end
of the billing cycle
Record all expenses and
keep receipts
Check credit statement for
errors
Always pay o balance
completely and Xmely
 How should you use credit cards properly?

Safety Tips:
Sign card with signature and Please
See ID
Do not leave cards lying around
Close unused accounts in wriXng and
by phone, then cut up the card
Do not give out account number unless
making purchases
Keep a list of all cards, account
numbers, and phone numbers separate
from cards
Report lost or stolen cards promptly
 What is an installment loan?
A loan in which the amount of payment and
the number of payments are predetermined,
such as an automobile loan.
Fixed payment
Set period of Xme
Set or varying interest rates
Examples: Car loans and mortgages
Installment Loans
 What is revolving credit?
A type of credit that does NOT have a xed
number of payments, such as a credit card.
No stated payo Xme
Limit to credit
Minimum monthly payments
Finance charges
Example: credit card
 What are student loans?
Loans oered to students to assist
in payment of the costs of
professional educaXon.
These loans usually charger lower
interest than other loans, and are
also usually issued by the
government.
Allows a person to nance their
educaXon and defer payments unXl
aeer graduaXon.
Controversy over Student Loans
How to establish and maintain good credit?

Good Types:
Establish a good credit
history.
Pay monthly balance on
Xme.
Use credit cards sparingly
and stay within the limit.
Do not move balance to
other cards.
Check credit report
regularly.