How to Use Credit Cards to Help You

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1 How to Use Credit Cards to Help You Pay credit card balance every month Pay credit card bills on time Apply for credit only when needed Keep track of all charges- keep receipts Check monthly credit card statements

2 Minimum Payment CC

3 How credit can hurt you! Making late payments- could trigger higher rates and hurt credit score Paying only the minimum- costs you money in interest in the long run Do not Exceed the card's limit- triggers a penalty fee Do not Charge items that cannot be paid off in the foreseeable future Do not own too many credit cards

4 Your credit history describes how you use money If you have a credit card or a loan from a bank, you have a credit history. Companies collect information about your loans and credit cards. Do you pay your bills on time? How many loans do you have? How many credit cards do you have? What is the balance on each? Companies also collect information about how you pay your bills. They put this information in one place: your credit report.

5 Credit / FICO Score FICO- Fair Isaac Company Range between 300 & 850 U.S. Median: 723 in 2014 < 620 = sub prime (means company can charge above standard interest rates) > 760 = best rates

6 Everyone is allowed one free credit REPORT per year. However, a credit report does NOT have a credit score. This is a number and it is based on your credit history but it does not come with your free credit report- you must pay for it. A high credit score means you have good credit. A low credit score means you have bad or questionable credit. Different companies have different scores. Low scores are around 300. High scores are around

7 The Cost of Borrowing Your Credit score: Your interest rate: Your monthly payment: % $1, % $1, % $1, % $1, % $1, % $1, Consumer Jungle

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9 35% Payment History Late payments have the greatest negative impact on your credit score. You prove if you are good or bad! Frequency is important to creditors too.

10 30% Outstanding Balances FICO- Looks at Total balance vs. total available credit Are you overextended? Can you go further into debt? Do you have too much credit to get more?

11 15% Length of Credit History FICO measures: Number of years you ve used credit. It is important that you start using credit early and use it wisely. The longer you ve had credit the better Length of time since you ve used certain accounts.

12 10% New Credit FICO Tracks: Number of new accounts you open If you opened multiple new accounts at one time makes it look like you plan on going into debt Even Multiple credit requests reduce your score.

13 10% Types of Credit FICO wants a Mix of: Open/Revolving Credit Credit cards & Installment Credits Car loan Home loan 2006 Consumer Jungle

14 How to Improve Your Score Pay all bills on time. Pay any delinquent bills. Lower your total credit card debt. Close unused credit cards. Do not open up new credit cards to increase available credit.

15 Do I have Credit??? If you do not have: a credit card never had a loan from a bank or credit union Without a credit history, it can be harder to get a job, an apartment, or even a credit card. You need credit to get credit.

16 How to Get Your Credit Report 1 Free Report each year by each credit bureau: TransUnion Experian Equifax Order once from all three companies (or) Order every 4 months from a different company

17 Duration of Info on Report Trade: Sears, Macy s 7 years from last activity Judgments or liens 7 years from filing. Chapter 7 Bankruptcy 10 years Medical: case by case

18 Shopping for a Credit Card Comparison shop for credit cards Don t take the first offer that comes to you: Pre-approval Means nothing No special rates

19 Shopping for card Know the Annual Percentage Rate (APR) Is rate F (Fixed) rate- 15% always Is rate V (variable) rate 12-20% Prime + Know the Introductory rate Length of introductory- use 0% but pay off before the interest kicks in. What will the rate be after introductory rate??????

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21 Shopping Know Grace Period- Interest-free time between transaction time and bill due date. Statement ends the 30th, bill due by 21st of next month. Usually days No grace period if: Carry a balance No stated grace period

22 Shopping Know Credit Limit- The maximum amount you can charge on a credit account. Actual credit limit is based on credit score Customer gets denied if you go over limit and you try to purchase something. Recommended limit 20% of net income

23 Shopping Know the Defaults A designation that indicates a person has not paid a debt that was owed. Universal default If you are more than 30 days late on a payment to anyone, your credit card company can raise your interest rate.

24 Credit Rewards

25 Shopping cont Choose a rewards card - a card that gives you rewards and works for you. For Example: 1.5 airline miles for $1 charged. Then use airline miles for plane ticket purchase.

26 Rewards cont... Pick a rewards card that benefits you Mileage, cash back, gas, etc... Pay off card at end of month and you get the rewards without costing anything. You can make money off the credit card.

27 Shopping cont "Little or no annual fee for young students"- Try to have no or small annual fee or you are paying for it. You can use the card for your benefit!!! Paying for the privilege of using a credit card Weigh cost of annual fee against value of reward Mileage Cash Back Gas etc...

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29 Shopping cont Know the Late-Payment Fee- Charge imposed for not paying on time Know your payment due date and time Know how you can make Payments - U.S. mail, phone, online, automatic bill pay, etc.

30 Shopping cont Know the Over-the Credit Limit Fee- You can exceed your credit limit but it will cost you- Higher Fee? Higher interest rate?

31 Shopping cont Know Currency Exchange Rate if traveling outside the US- Credit Cards have replaced traveler's checks. Fee will be a: Flat amount Percentage of withdrawal Important only if you travel internationally frequently

32 Shopping cont Know Balance Transfer The process of moving an unpaid credit card debt from one issuer to another Shift balances from one card easy? Cost?

33 Ideal Card Consumer Reports on what the Top 10 cards should have: No universal default No two-cycle billing No balance transfer fees Grace period of at least 25 days No annual Fees Great Rewards that work for your spending

34 Top 10 Consumer-Friendly Cards Card Issuing bank Intro APR Go-to APR Cash advance fee Late-payment fee Over-limit fee Currency-exchange fee Platinum MasterCard Town North none v 7.99% 2% $15 $15 none Visa Platinum First Tennessee f 3.90% v 8.40 $3 $35 $35 3% Visa Gold Pulaski f 0.00 f 8.50 none $35 $29 none Visa Platinum Rewards Simmons First National none f 8.95 $3 $29 $29 $2 Target Visa Target National none f 9.90 $3 $35 none $1 Visa Platinum BB&T f 1.90 f 9.90 $3 $35 $29 $2 Platinum MasterCard Franklin Templeton Bank & Trust none v 9.99 $3 $29 $29 $2 Visa Platinum RBC Centura f 2.90 v 9.99 $4 $29 $29 $1 Visa Platinum Commerce f 2.99 v none none none $2 Visa Platinum Zions none v $2 $29 $29 $1

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36 Online Banking All cards Allow you to manage your account online or on phones Allows you to see monthly statement Pay online- no stamp costs Track rewards No hard copy unless you print

37 Do You Recognize this Ad? Dinner: $30 Movie: $17 Dessert: $10 Second date with the right girl? Priceless Is any of that really priceless- Mastercard wants you to keep charging!!!

38 Is it Priceless? The Power of Compounding Interest Scenario: 10 dates & you would owe $570 Interest Rate: 18% Minimum Monthly Payment: 2.5% or $14 It will take you 8 years and 1 month to pay for those 10 dates. In that time, you will pay $ in interest. You would be approximately 26 years old!

39 The True Cost of Paying the Minimum Payment Payment Schedule: It will take you 8 years and 1 month to be rid of your debt. In that time, you will pay $ in interest. Month Minimum Payment Interest Paid Principal Paid Remaining Balance 1 $14.25 $8.55 $5.70 $ $14.11 $8.46 $5.64 $ $13.97 $8.38 $5.59 $ $13.83 $8.30 $5.53 $ $13.69 $8.21 $5.48 $ $13.55 $8.13 $5.42 $536.64

40 The Credit Card Industry 60% of all transactions are now paid with DEBIT AND CREDIT CARDS $890+ billion in credit card balances already on the books in the US $156+ billion in revenue in 2014 Citibank more profitable than Microsoft and Wal-Mart