18.1

Credit CardsBy: Kelsey Winchester

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 RateCredit 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 RatingA 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 LawTruth 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 "open end" credit accounts, such as credit card or charge card accounts.