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Standard. SSEPF4 – The student will evaluate the costs and benefits of using a credit card. SSEPF4a- List factors that affect credit worthiness. . Credit. Credit is the ability to obtain goods or services before paying them, based on a promise to pay later. - PowerPoint PPT PresentationTRANSCRIPT
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StandardSSEPF4 – The student will
evaluate the costs and benefits of using a credit card.
SSEPF4a- List factors that affect credit worthiness.
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CreditCredit is the ability to obtain
goods or services before paying them, based on a promise to pay later.
Each time a person uses credit he or she is in effect borrowing money.
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Revolving CreditIt is credit that is available up to
a limit and automatically renewed when debts are paid off or down.
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The 3 C’s of Credit WorthinessCharacter• Are you
a good person?
• Do you have a job?
• Have you used your credit wisely?
Capacity• How
much money do you want?
• Are you able to pay it back?
Collateral• Property
or other security used to guarantee the repayment of a loan
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Other Factors that affect Credit WorthinessPayment on timeHow much credit are you usingHow many people have looked at
your credit
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Benefits of good creditLow interest rates meaning lower
paymentsEasy to get loans and more credit
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Causes of problemsHigh Monthly
Payment
Cannot afford to buy things
Unpaid Balances or Worst Case Scenario
Bankruptcy
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What is the first step in choosing a credit card?Determine how it will be used
◦Emergencies◦Purchases◦Bill paying◦Gas
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What about APR?APR is the Annual Percentage
Rate.◦The cost of credit (finance charge)
expressed as a yearly percentage.Credit Cards can have many
different APR’s.◦Purchases ◦Cash Advances◦Balance transfers◦Late Payments or Introductory Rates
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Fixed vs. Variable APRFixed APR’s do not change with
out notice from the credit company
Variable APR’s can change at specified times according to your contract (usually every 6 months).
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Credit LimitThe maximum total amount the
user may charge on the card.
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Common IncentivesRebatesFrequent Flyer
MilesAdditional
Warranty coverage
Car rental insurance
Travel accident insurance
Rewards points
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Common Fees Credit Cards ChargeAnnual fee – Charged for having
the cardCash-advance fee – when the
user gets cash from on ATMBalance transfer fee – when the
user moves a balance from another credit card
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More Fees…..Late payment fee – charged
when payment is received after the due date.
Over-the-credit limit fee – when the user goes over their credit limit.
Credit-limit increase fee – when a user asks for an increase in the credit limit.
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And even more fees…..Set up fee – charged when a new
account is openedReturn item fee – when the user’s
payment check bounces.
Other fees◦Paying by phone◦Talking to a customer service person◦Reporting to credit bureau’s
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Credit Card Companies must disclose:APR’s for purchasesOther APR’sVariable rate informationGrace period for repayment of balancesMethod of computing the balance for
purchasesAnnual feesMinimum finance chargeTransaction fee for cash advancesBalance-transfer feesLate-payment feesOver-the-credit-limit fees
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Consider this situationIt is midnight and your car breaks
down. You are far away from home. You use your cell phone to call an auto-repair service. The service representative says that a service visit will cost $50, plus the cost of any parts or labor that are necessary to get you driving again. All you have is $7 in your pocket (you have no debit card). Should you use a credit card? Explain your answer.