Todays Presentation Introduction Credit card basics and terminology Obtaining a credit card Extra information for you How to handle disputes Conclusion and activity Please ask questions at any time ID: 153032
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Slide1
Credit Cards 101Slide2
Today’s Presentation
Introduction
Credit card basics and terminology
Obtaining a credit cardExtra information for youHow to handle disputesConclusion and activityPlease ask questions at any time. Slide3
What are Credit Cards?
Pre-approved credit which can be used for the purchase of items now and payment of them later.Slide4
Why Use a Credit Card?
Proper use can help establish good credit rating
Conveniently accepted across United States and abroad
Emergency buying powerAdditional form of identificationRecord of purchases on bill statementOften required to hold a reservationSlide5
Why Not Use a Credit Card?
Improper use can damage credit rating
Higher risk for impulsive buying and overspending
Debt trap when used unwiselyExpensive way to borrow due to high interest ratesLess to spend in the future due to paying off purchases from pastPossible hidden fees & surchargesPrivacy is an increasing concernIdentity theft easierSlide6
Types of Credit Cards
Cards where purchases can be made in many locations
Bank Credit Cards (Visa/Master Card)
Card issued by financial institutionCredit is issued by service provider (Wells Fargo Visa card) Balance paid-off at end of month or extended over period of timeCharge Cards
Most often is American Express
Not accepted at as many locations as bank cards
Entire balance
must
be repaid in 30 days
(unless using
as a credit card).Slide7
Types of Credit Cards
Cards where purchases are made in particular location
Retail Credit Cards
Credit and card issued by particular retailer (Old Navy, The Bon, Home Depot, Shell Oil)Balance paid-off at end of month or extended over period of timeSlide8
Obtaining a Credit Card
Comparison shop when choosing the right card
Know the facts
Terms and conditions of credit card accounts differBe aware of “hidden” costs of card(s)Federal Truth in Lending ActRequires card issuer to display the cost of credit card Schumer Box
: easy to read box formatSlide9
A Schumer Box you May Expect To See
Annual Percentage Rate for purchases and balance transfers*
2.99% APR (.00819% daily periodic rate) on purchases and balance transfers until the first day of the billing cycle that includes the six (6) month anniversary date of the opening of your account. In the absence of the introductory rate, 12.99% APR(.03559% daily periodic rate) on purchases and balance transfers.**
Grace period for repayment of the balance for purchases
You will have a minimum of 25 days without a finance charge on new purchases if the total New Balance is paid in full each month by the statement closing date.
Method of computing the balance used in calculating finance charges for purchases
Average daily balance (including new purchases)
Annual fee
$25
Minimum finance charge
For each Billing Period that your Account is subject to a finance charge, a minimum total Finance Charge of $0.50 will be imposed.
Miscellaneous fees
Cash advance fee: 2.5% of amount of the cash advance, but not less than $2.50.
Late payment fee: $25
Over-the-credit-limit fee: $25
Returned check fee: $25Slide10
Annual Percentage Rate (APR)
: interest rate charged for amount borrowed in terms of percentage per year
Grace Period
: amount of time allowed before finance charges (interest or cost of credit) are applied
Annual Percentage Rate for Purchases
Grace Period for Purchases
Minimum Finance Charges
Balance Calculation Method for Purchases
Annual Fees
Transaction Fees for Cash Advances
Late Payment Fees
19.9%
Not less than
25 days
$.50 when a finance charge at a periodic rate is charged
Average daily balance method (including new purchases)
$20 per year
2% with a minimum fee of $3
$29
A Schumer Box and Credit Card Terms ExplainedSlide11
Minimum Finance Charge
: minimum amount charged for card use
Balance Calculation Method
: method used to determine balance including finance charges
Annual Percentage Rate for Purchases
Grace Period for Purchases
Minimum Finance Charges
Balance Calculation Method for Purchases
Annual Fees
Transaction Fees for Cash Advances
Late Payment Fees
19.9%
Not less than
25 days
$.50 when a finance charge at a periodic rate is charged
Average daily balance method (including new purchases)
$20 per year
2% with a minimum fee of $3
$29
A Schumer Box and Credit Card Terms ExplainedSlide12
Balance Calculation Methods
Creditors use a number of ways to determine how
interest, often called finance charges, accumulate
Average Daily Balance Method (including new purchases witha grace period)
If the balance is not zero, interest is applied to new purchases
when they are made, if balance is zero, a grace period is allowed before interest is charged
Average Daily Balance Method
(including new purchases with
no grace period)
Regardless of the previous month’s balance, interest is applied
to new purchases as they are madeSlide13
Balance Calculation Methods
(continued)
Previous Balance Method
Interest is only paid on the previous balance, not on purchasesmade since the last paymentTwo-cycle Average Daily Balance (including new purchases)This method should be avoided by consumers! The interest is paid on the current balance as well as the previous month’s balance, this leads to double finance charges
A zero-balance must be held for two months in order to avoid
chargesSlide14
Annual Fees
: yearly charge for credit card ownership
Cash Advance Transaction Fees
: cash withdrawal feesLate Payment Fees: penalty fee for payments not made by the due date
Annual Percentage Rate for Purchases
Grace Period for Purchases
Minimum Finance Charges
Balance Calculation Method for Purchases
Annual Fees
Transaction Fees for Cash Advances
Late Payment Fees
19.9%
Not less than
25 days
$.50 when a finance charge at a periodic rate is charged
Average daily balance method (including new purchases)
$20 per year
2% with a minimum fee of $3
$29
A Schumer Box and Credit Card Terms ExplainedSlide15
Opening a Credit Account
Applicant completes a credit application
Lender conducts a credit investigation
Applicant is given a credit ratingLender accepts or denies the credit requestIf accepted, applicant evaluates the credit card details (USE THE SCHUMER BOX!)
Applicant accepts or refuses credit termsSlide16
Understanding the Bill
Minimum Payment Due:
minimum amount to be paid
If this amount is paid and a balance is left on the account, additional finance charges will be included in the following month’s balancePast Due Amount: the previous amount due which was not paid before the due dateDue Date: the day by which the company requires a payment to be made
New Balance
:
the total amount owed on a credit card Slide17
Understanding the Bill
(continued)
Credit Line
: the maximum amount of charges allowed to an accountClosing Date: last day for transactions to be reported on the statementCharges, Payments, and Credits: the transactions which occur with the use of a credit cardFinance Charge: charges assessed for credit card useSlide18
Handling Disputes
Two Types of Disputes:
1. In the case of any unauthorized use of your card…
Liability Limited to $50Must Notify Company ASAPPhone AND Written Notice RequiredSlide19
Handling Disputes (continued)
2. In the case of a billing error…
Notify Company Within
60 DaysLetter must includeNameAccountDollar Amount InvolvedReason for DisputeAny Other Clarifying InformationSlide20
Using a Credit Card Properly
Only use when there is no doubt about ability to pay-off the charges at the end of the billing cycle
Record all expenses and keep receipts
Check credit statement for errors Always pay off balance completely and timely Slide21
Sign card with signature
and
“Please See ID”Do not leave cards lying aroundClose unused accounts in writing and by phone, then cut up the cardDo not give out account number unless making purchasesKeep a list of all cards, account numbers, and phone numbers separate from cardsReport lost or stolen cards promptly
Safety TipsSlide22
Conclusion
What are credit cards
Different types of credit cards
Understanding the Schumer Box and credit card vocabularyUnderstanding the billHow to handle disputesTips for proper and safe use of credit cardsSlide23
We are Here for You!
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994-7223
safe@montana.edu
www.safe.montana.edu
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