CS+275+Week+5+Managing+Credit+Lecture.ppt - Consumer...

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Consumer Science 275Consumer FinanceWeek 5Managing Credit Wisely
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/Principles-of-Information-Systems-13th-Edition-9781305971776-649/
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Chapter 7 / Exercise 9
Principles of Information Systems
Reynolds/Stair
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Chapter 6Using Credit Cards:The Role of OpenCredit
Learning Objectives1.Know how credit cards work.2.Understand thecostsof credit.3.Describe the different types of credit andcharge cards.4.Know what determines your credit cardworthiness and how to secure a credit card.5.Manage your credit cards and open credit.
IntroductionConvenient, but if you’re not careful, creditcards will cost you.Some charge over20%interest on unpaidbalances.Most people don’t considerinterest chargeson purchases they have to have.Manage credit wisely to avoidhigh interest.
Pre-Plastic “Charge Cards”“Charge Coins” firstissued in 1865Mostly by DepartmentstoresUsed account numbersCharge platesUsed until 1960s
“Charge Cards”Issued by oil companies and departmentstores in early 1900s“Charg-It” card issued in 1946 by BrooklynbankMerchants forwarded bills to bank for paymentDiner’s Clubwas first major card in 1950By 1951 over 20,000 in useTechnically a credit card with no revolvingbalance—payable in full every month
“Charge Cards” to “Credit Cards”American Expressissued T&E (travel andentertainment) card in 1958First with plastic in 1959First card with “revolving credit” wasintroduced in 1959Now could carry a balanceFirst widespread card issued was by Bank ofAmerica in 1966BankAmericard
A First Look at Credit Cardsand Open CreditCredit involves receiving cash, goods, or services with anobligation to paylater.Open credit (revolving credit) is a line of credit extendedbeforethe purchase.Unpaid balance plus interest carries over to next month.Pay back at your pace as long as you meet minimumsUnpaid balances plus interest carry over to next billing cycleHigher balances on credit lines, higher costs.
Interest RatesAnnual Percentage Rate (APR)The true “simple interest rate” paid over the life of theloan.Calculated same way but what varies is what isincludedAPR for all consumer loans must be disclosed.Truth in Lending Act
SchumerBox”The credit card issuer must tell you:the APR or APRsfinance charges, including theminimumfinance chargethe minimum payment requiredthe method used for computing your outstanding balancethe actual company offering you credit (sometimes not thecompany marketing the card)the credit limitthe grace periodthe annual fee, if anythe fees for credit insurance, if any
Interest RatesKey things to look out for:FixedAPR vs.variableAPRDifferent rates for different productsSilverGoldPlatinumTeaserRatesDifferent rates for different linesCard balanceCash advance balancePast due balanceCompound interest
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Calculating the Balance OwedKey is balance calculation methodAverage dailybalance method (most common)Mathematical average calculated from summing the individualdaily balances and dividing by the number of days in the billingperiod.Some methods include new purchases when determining the daily balance,while others exclude the new purchase amounts.

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Term
Fall
Professor
Sam Veit
Tags
Credit card
We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
Principles of Information Systems
The document you are viewing contains questions related to this textbook.
Chapter 7 / Exercise 9
Principles of Information Systems
Reynolds/Stair
Expert Verified

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