Credit Cards Rules and Legislation How does a credit card work? Purchase Item: Approval: Sign Merchant sends receipt to bank gets credit for transaction VISA processes and sends money to bank/debts card holder Electronic notification to card holder Bills card holder *companies charged fees but do not usually mind* Difference Between: Credit Card Charge Card Smart Card Credit Card Company will issue you Credit Line Interest Rate – ignore “teaser” rates APR – annual percentage rate Interests compound daily A lower rate makes a difference!! Finance charge Grace Period Annual Fee – DO NOT WANT ONE!! Understanding YOUR STATEMENT NEW BALANCE VERSUS PRINCIPAL MINIMUM PAYMENT DUE THREE BIGGEST COSTS OVER LIMIT LATE CHARGES CASH ADVANCES Biggest Mistakes CASH ADVANCES… 3-5% BALANCE OR 5-10 FEE PLUS 25% INTEREST RATE NOT PAYING IN FULL EACH MONTH Obviously…. Spending more than you can pay each month What are the challenges of credit card use? Maintaining your budget High Interest Rates and Debt Credit Card Fraud http://video.nytimes.com/video/2008/12/3 1/business/1194837095176/debt-trapcollege-borrowing-catchesup.html?scp=4&sq=debt&st=Search What are the advantages of having a credit card? Purchasing Power/ Ease of Purchase Building a line of credit Protection of Purchases Emergencies Rewards How does the government protect credit card users? 2003 legislation Free Credit Report No credit card numbers on bills Red Flags More notification What is a credit report? What is a credit report? Why does your credit report matter? What is a credit report? Your credit report contains your credit history as reported to the credit reporting agency by lenders who have extended credit to you. What is specifically on the report? Includes: Addresses Social Security No. Current/Previous Employers Estimated Income Credit History: payments, time, amount Credit cards Loans Collections Bankruptcy What’s the magic number? 850 What is your FICO score? 35% payment history 30% amounts owed 15% length of credit history 10% new history 10% types of credit used How do I get my credit score? Consumer Reporting Agencies Equifax TransUnion Experian Government regulated but NOT government agencies • It is estimated that 40% of credit reports are inaccurate!* What if there is wrong information? Tell agency what information you believe is incorrect Clearly identify each item in your report you dispute. State the facts and explain why you dispute the information. Request deletion or correction.