Credit Card Questions

What is credit?  Borrowing money for a fee with the promise to pay back at a later date. This credit you apply for.  Credit cards  loans  Your record of borrowing and paying an account. Your record is reflected on your credit score. This credit is the result of how you handle your money.

Credit Card Accountability, Responsibility and Disclosure Act 0f 2009   Starting in February 2010   Under 21 will have to:   Prove they have a job to pay back the debt OR   Get an adult to co-sign

4 Types of Credit Cards  Single Product  Revolving  Travel & Entertainment  Bank Card

Single Product Card  Service for 1 product  You pay full amount at the end of each month  If you don’t pay the full amount when due, there will be a HIGH penalty  Example: Gasoline

Revolving Card  Have to pay a minimum payment but you can revolve the balance to the next month  Example:  Department Store

Travel & Entertainment Card  Has an annual membership fee  Receive discounts  Pay full balance at the end of each month  30 day account  Examples:  Diner’s Clubs  Hertz Rental Cars

Bank Card  Revolving 30-day account  Minimum payment  Revolve Balance  NO Annual Fee  Example:  Visa  Mastercard

Factors Companies Look for in Approving or Declining Credit Card Applications You have a job $$$$ You have a job $$$$ Credit History Credit History Length at your current address Length at your current address

APR  Annual Percentage Rate (APR) –  The amount of interest you pay over a year  Currently, US has no maximum  Texas limits it to 21%

Advantages to Credit CCCConvenience (widely accepted, easy to use) EEEEmergency Situations BBBBuilds Credit Ratings PPPPurchase on Time (Buy Now/Pay Later) SSSStatement Shows Record of How you Spend Money

Disadvantages to Credit  Charge Beyond Your Means  Fees & Interest Charges  Lost or Stolen Cards could ruin your credit

Credit Terms FFFFinance Charge - interest on unpaid (revolved) balance each month MMMMinimum Payment – lowest payment required to keep account in good standing (usually 3% of total) CCCCredit Limit – maximum amount you can charge on an account

More Credit Terms…  Asset – something you OWN  Debt – something you OWE

Typical Credit Cards  Exxon  Sears  Diner’s Club  Visa  Dillard’s  Texaco  Hertz  Master Card  Discover Card  American Express

Credit Card Types  Exxon – Single Product  Sears – Revolving  Diner’s Club – Travel & Entertainment  Visa – Bank  Dillard’s – Revolving  Texaco – Single Product  Hertz – Travel & Entertainment  Master Card – Bank  Discover Card – Travel & Entertainment  American Express – Travel & Entertainment