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18.1 18.1 Presentation Transcript

  • Credit: arrangement for deferred payment for goods and services
  • Finance Charge • This refers to charges or fees which are applied to your bill for using the credit card, eg balance transfer fees, late fees, over limit fees • A credit card company might issue a finance charge because that is how they make money or it is the consequences.
  • Interest Rate Credit card companies could charge even the smallest amount to something that’s bizarre. For example: Some companies offer 0% and some offer 40%! It is dangerous to pay the minimum amount each month because that could make your credit score go down.
  • Credit Card Companies • Credit Card Companies include:  master card  American express  Discover card  Visa
  • Credit Rating A credit rating estimates the credit worthiness of an individual, corporation, or even a country. It is an evaluation made by credit bureaus of a borrower’s overall credit history A good credit score is 700 and above A bad credit score is 650 and below
  • Benefits • Benefits of using credit are:  Convenience- can make it easy for you to buy.  Immediate Possession- Credit allows you to have the item now.  Savings- Some stores wend notices of special sales to credit customers.  Credit Rating- you can establish a favorable credit rating.
  • Problems • Problems concerned with credit are:  Overbuying  Careless buying  Higher prices  overuse of credit
  • Formula • The formula for calculating the interest is interest= principal x rate x time
  • Credit Application • Is a form on which you provide information needed by a lender to make a decision about gaining credit. You often fill one out when you are applying to buy a house, car, etc.
  • Truth in Lending Law Truth in lending law of 1968 was the first of a series of credit protection laws. Truth in lending requires that you be told the cost of credit before signing agreement.
  • Fair Credit Billing Act • The Fair Credit Billing Act (FCBA) is a United States federal law enacted as an amendment to the Truth in Lending Act (codified at 15 U.S.C. § 1601 et seq.). Its purpose is to protect consumers from unfair billing practices and to provide a mechanism for addressing billing errors in quot;open endquot; credit accounts, such as credit card or charge card accounts.