Download - 18.1
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Credit CardsBy: Kelsey Winchester
Credit: arrangement for deferred payment for goods and services
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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.
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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.
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Credit Card Companies• Credit Card Companies include:
master card American express Discover card Visa
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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
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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.
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Problems• Problems concerned with credit are:
Overbuying Careless buying Higher prices overuse of credit
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Formula• The formula for calculating the interest is interest=
principal x rate x time
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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.
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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.
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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.