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Credit Card Power Point

Credit Card Power Point






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    Credit Card Power Point Credit Card Power Point Presentation Transcript

    • Understanding Credit School of Management University of MI Dearborn Martha R. Rowland Director, Center for Economic & Entrepreneurial Education November 25, 2008
    • Outline
      • What is credit
      • Common forms
      • How you obtain credit
      • Using credit wisely: managing a credit card
      • How much it costs
      • Credit reporting
      • Using credit in today’s financial crisis
      • Helpful websites
    • Credit
      • Borrowing money – principle
      • Paying for the use of someone else’s money, interest.
      • Common types
      • Credit Card: usually an unsecured loan from the lender’s point of view.
      • Installment Loan: for example a car or a large purchase
      • Student Loan: how you pay for school
      • Mortgage: paying for a house
    • Are you credit worthy?
      • The 4 C’s of credit: Collateral, Capital Capacity & Character
      • Collateral: What a lender requires to offset their risk when lending you money?
      • Capital: What have you accumulated – own – things of value
      • Capacity: Can you repay the loan: income, employment
      • Character: Do you have a record of repaying a loan: your credit history
    • Where to obtain credit
      • Banks or credit unions
      • Finance arms of major corporations: GE financial, GMAC, Ford Credit, Chrysler Financial
      • Federal Government
      • Other finance firms: Household Finance
    • How much credit costs
      • Credit cards: membership fees
      • Fees: for late payments, over credit limit fees, bounced check fees.
      • Minimum: always pay more than the minimum
      • Interest rate: APR – the lower the better!
      • What is the APR? The rate charged per period X the no. of periods per year.
      • Disclosure of this rate is required by law for all consumer loans. It can be change w/15 days notice.
      • Is the APR the actual rate you are paying? NO
    • APR vs the Effective Rate
      • The APR is straightforward. The monthly rate X 12 months per year = APR.
      • The APR is the stated or quoted rate.
      • The real cost of credit is the EAR or the Effective rate you are paying.
      • An APR of 18% = 1.5%/mo.
      • The EAR is actually 19.56%
      • EAR = (1+APR/12) 12 -1
    • How to build a good credit history
      • The better your history, the lower the cost of credit
      • Pay your bills on time
      • Save money on a regular basis
      • Be choosey about the credit cards and loans: limit the number and keep them a long time
      • Your credit score!
    • What does your credit score mean?
      • FICO score = credit score
      • Higher the better.
      • Range is 300-850.
      • Score is based on:
      • Factors include paying on time, total amount owed on all accounts, number of accounts, and balances. Also the number of years of history and the number of times requesting new credit.
    • Using credit in today’s financial environment
      • Pay off credit cards, close inactive accounts
      • Save money
      • Watch for terms changing. More fees!
      • Live below your means
      • Communicate with a lender early if a problem has occurred.
    • Recourses for you: manage your credit!
      • Free credit reports are available annually
      • go to www.annualcreditreport.com or call 877 – 322-8228.
      • Comparison of costs and features: www.cardtack.com
      • Current loan/credit card rates: www.bankrate.com and www.banx.com
      • National Center for Financial Education: www.ncfa.org
      • Credit reporting agencies: www.equifax.com
      • www.experian.com , and www.tuc.com .
      • Debt Counselors of America: www.dca.org
      • National Foundation for Consumer Credit: www.nfcc.org
    • Sources
      • Information for this presentation came from the following:
      • Practical Money Skills for Life, Teacher’s
      • Edition. VISA USA, Inc. 2000
      • NEFE High School Financial Planning Program, Student Guide, 2006
      • The ABCs of Credit Card Finance, 2007 Carol A. Carolan, Phd. Center for Credit Card Education
      • Fundamental of Corporate Finance, 8 th edition, Ross, Westerfield Jordan, 2008