Deciding on a credit card

Credit Cards Qualifying for Credit Use of credit Debitor – person who borrows money from others Creditor – person or business that loans money to others. Qualifying for Credit Able to repay the loan – looking at: Income, financial & collateral Income – need job, earn an income interest, alimony, dividends, etc. Financial Position – based on capital Value of property (bank accounts, investments, real estate, & other assets) after deducting your debts

Credit Cards Qualifying for Credit (con’t) Collateral – property to assure repayment of loan Repossessed – lending institutions can take items used as collateral for nonpayment Making Payments Principle (amount borrowed) plus interest (time you have the loan) = balance due Stores and credit card companies disclose the minimum payment After due date: a late fee – which will be added to your balance due

Sources of credit Banks and Credit Unions Finance Companies Offer credit cards/Closed-End Loans Credit Unions – interest rates might be lower than banks Finance Companies An organization that makes high-risk consumer loans (turned down by banks/credit unions) Higher interest rate Consumer Finance Companies - most of loans to people buying durable goods Sales Finance Companies – loans to people through authorized representative (GMAC Financial Services)

Credit Record Credit History complete record of your borrowing and repayment performance. Credit Bureau – gathers, stores & sells credit information to other businesses. Business’ record each credit card transactions. Monthly – data is transmitted to one of the three credit bureaus: TransUnion – www.transunion.com Experian – www.experian.com Equifax – www.equifax.com Yearly report Credit history is free to you every 12 months Other services are available at additional costs

What goes into FICO Score

FICO Score Score   Explanation (source: Personal Finance Textbook ISBN: 13-0-538-44937-3) 800 – 950 Excellent used credit wisely; has considerable capital but low revolving debt. Pays off credit monthly; rarely carries credit balance other than home mortgage loan 700 – 799 Good Good credit payment record, good solid income and the ability to repay debts. Pays monthly credit obligations on time and pays more than the minimum 500 – 699 Fair Considerable debt and is making obligations with the grace period, makes minimum payments; income is adequate, may have some small credit discrepancies Below 500 Poorly Not able to take on much debt some credit history but not well established; income may be questionable has had some credit problems in the past

Credit Card Records Credit Freeze Consumers request a “freeze” their credit reports & files (for a fee) New credit applications are blocked & loan solicitation information can’t be given by credit bureaus http://www.myfico.com/crediteducation/whatsinyourscore.aspx

Creditworthy The 5 C’s used to determine if you are creditworthy Character: Will you repay the debt? Responsible attitude toward honoring obligations Pay bills on time Capacity: Can you repay the debt? Financial ability to repay a loan with present income Capital: Do you have sufficient assets to support the debt? Your assets are worth more than your debts (checking, savings, investments & real estate)

Creditworthy Conditions: What affects your ability to repay the debit? External conditions – loss of job, economy Collateral: What assets are pledged to support the debt? House, car or furniture that is pledged to assure that payment

Credit Card Commercials Watch the commercials. What features of each credit card are being showcased? What marketing strategies are the credit card companies using? https://www.youtube.com/watch?v=fwqq4MJ9yeQ https://www.youtube.com/watch?v=mXEP_-ev0aY https://www.youtube.com/watch?v=MjRd9TW3nmQ https://www.youtube.com/watch?v=Z0ZNAHZlkMY

How to Choose a Credit Card http://www.wisebread.com/how-to-choose-a-credit-card Review this list of 10 tips for choosing a credit card. Pretend you are about to open a credit card. Categorize each tip as "Very Important for Me, Personally," "Somewhat Important for Me, Personally," "Not Important to Me, Personally."

Why 0% APR MIght Not Be Good for Your Credit http://www.foxbusiness.com/personal-finance/2013/06/03/why-0- apr-offers-might-not-be-good-for-your-credit/ In your notes, write at least 3 reasons why a introductory rate or balance transfer APR of 0% might not be a good offer after all.

How to Maximize Your Credit Card Rewards https://www.youtube.com/watch?v=ojgPjSzZmj0 After watching this video, write down the tips for maximizing a cash back or rewards card.

Mom, Can You Co-Sign My Credit Card? If you're under 21, you (most likely) cannot get your own credit card. You'll need your parent's help. Read this article and then explain the difference between co-signing, a joint account, and an authorized user. http://www.cbsnews.com/news/mom-can-you-co-sign-my-credit- card

ANALYZE: Should They Open a Credit Card? Follow the directions on the worksheet to complete this activity.

Security Tips https://www.consumer.ftc.gov/articles/0205-using-credit-card If you decide to open a credit card, security is extremely important. Scroll to the bottom of this article to the section labeled "Security Tips & More Information.“ Record the tips into your notebook

Questions