Credit Cards – friend or foe

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					So What is Credit Anyway?

     The truth about credit
       and credit reports
     An arrangement for deferred
      (delayed) pay-back of purchases or

     Measured by a number known as a
      credit score
         Typically 300 – 850
         The higher the better!!!
      Positive Credit
         A consumer can build positive (high/good)
          credit by being responsible with credit choices

◊   Practice good banking
                                 ◊   Apply for credit sparingly,
                                     keeping credit inquiries
◊   Pay bills consistently and       low
    on time
                                 ◊   Hold a low number or
◊   Keep public records free         credit/store cards
    of bankruptcy
                                 ◊   Check credit report
◊   Keep a reasonable or             annually to remove errors
    small amount of debt
       Negative Credit
          This results from irresponsible
           (poor/bad) credit choices

   Bouncing checks
                                Carrying many credit/store
   Routinely paying bills       cards
                                Defaulting on a loan
   Having a criminal record
                                Having cards over the limit
   Holding a large amount
    of debt
NO Credit
   If you continuously pay cash for all
    purchases and never apply for
    credit/bank accounts, you will not have
    the chance to build your credit
   Can result in being denied credit for
    future purchases (car, house, etc.)
   It is IMPORTANT to build some credit
5 Categories for Credit Scoring
1.    35%-Payment history
     - Timely manner in which a consumer pays debt
2.    30%-Outstanding debt
     -Amount of debt currently held
3.    15%-Credit history
     -How long the consumer has held credit accounts and how
         often they are used
4.    10%-Pursuit of new credit
     -How much credit is acquired over the length of the
         consumer’s credit history
5.    10%-Types of credit in use
     -May include credit cards, gas cards, store cards or accounts,
         loans, etc.
Other Credit Score Factors
◊   Length of time at current address
◊   Current income
◊   Financial information
◊   Late payments
General Rule!

         • Keep the amount of debt
         currently held at 25% of the total
         amount of available credit

            For example - if Sue’s total
            amount of credit available is
            $1,000, her current amount of
            debt should not exceed $250
Credit Report
◊   a record of a consumer’s credit history
    ◊ Credit history - a record of transactions
      involving credit use

◊ Individuals do not have a credit report
if they have not previously used credit
Information on Credit Reports
   Name and aliases        Public records
   Current and past         ◊   Criminal/financial
    addresses               Payment History
   Marital status          Loans
   Date of birth           Open/existing credit
   Employment history      Number of credit
                             inquiries (requests
                             for credit)
CRA’s (Credit Reporting Agencies)
Keeps track of consumer’s credit
 transactions and compiles credit reports

   Equifax
   Trans Union
   Experian
Who reports to CRA’s?
◊   Store accounts
◊   Credit card companies
◊   Mortgage and other
    loan lenders
◊   Financial institutions
◊   Landlords
◊   Courts
◊   Utility accounts
◊   Cellular phone
◊   Delinquent accounts
Credit Cards – friend or foe?

      The Pros and Cons of
        Credit Card Use
Top 4 Companies
   Visa
   Mastercard
   American Express
   Discover
Credit Card Pro’s
   Virtually “free” money!
   More secure than carrying cash
   Flexible spending
   Rewards for spending!
   Helps you pay on time when your in a
   Build credit!!!
      Credit Card Con’s

   Most Expensive Debt (highest interest rates
    – typically 18 – 20%)
   More prone to fraud/identity theft
   Makes it easier to overspend
   Pay for more than you purchased
    (sometimes more than double!!)
Tips for Positive Credit Card Use
   Record your purchases to keep track of
    spending (basket of receipts)
   Avoid purchasing things you know you
    can’t pay off short-term
   Choose a card with NO annual fees and
    sensible reward options
   ALWAYS pay more than the minimum
Things to look out for…

   Annual Fees (yearly cost for owning the
   Interest Rates (charge on borrowed
    money each month it’s not paid back)
   Restrictions on Rewards
   Additional Benefits (i.e. checks)
   Misc. Charges
      Possible Benefits!

   Cash Back/Rebates         Theme Park
   Reward Points              Rewards
   Investment Rewards        Dining/Restaurant
   Frequent Flyer Miles       Rewards
   Gas Rewards               Brand Name
   Automobile Rewards
                              Low Interest Cards
   Hotel Rewards
                              Charitable
Some examples!!
   VISA
         Disney, Bucks Back, Amazon, VW,
          Wawa, Marriott, BP, Home Improvement
   MasterCard
         Home Rebate, Toys R Us, Driver’s Edge
   American Express
         Delta, JetBlue, Hilton, The Knot
   Discover
         Miles, Open Road, Student, Business

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