Professional Documents
Culture Documents
Jill is little bit nervous about getting a credit card as she is still in college. She knows that many of Her friends has misused credit card. However she decides to carefully examine the advantage and disadvantage of having a credit card. Following steps should be adopted for carefully planning your credit
disadvantage.
Differentiate among various type of credit
Assess your credit capacity and build your credit ratings
Describe the information creditors look for when you apply for
credit
Identify the steps you can take to avoid and correct credit
mistakes
Describe the laws that protect you if you have a complaint about
consumer credit
Most consumers make current purchases from three alternatives: They can draw from savings Use their present earnings Borrow against their expected future income
DISADVANTAGE
1. Builds the habbit of overspending 2. Failure to pay lead to loss of income and reputation 3. It can lead to long term financial problem 4. Does not increase total purchasing power 5. Credit cost money
Example:Jill has decided to go ahead and get a credit card. She is aware of the problems with using credit cards and plans on being very careful how she uses her new credit card. She also plans on keeping careful track of what she puts on her credit card each month. She also plans on being a convenience credit card user and pay off her balance in full each month.
Installment sale credit Installment cash credit Single lump sum credit
2.
Credit cards
Co branded credit cards Debit cards
product or service.
There are many different kinds of co-branded cards
available today which include ones with 'points' towards the purchase of a car and cash back programs.
Example of Installment Sales credit Jack is using a closed ended loan to purchase a used car. He is using this loan for a specific purpose and has specific repayment terms. In this case the bank will probably retain title to the car until he has finished paying off the loan. Example of Installment cash credit Donna gets $ 5000 loan in cash from bank. She is using a closed ended loan to take her vacation. She will repay this loan in monthly installment of $ 430. In this case there is nothing to use to secure the loan and there is no down payment for this loan. However, it still has specific repayment terms.
of credit on a credit card is the maximum amount that can be borrowed at one time. James uses his credit card for the convenience of not having to carry around a lot of cash and the efficiency of only having to pay one bill each month.
Ricky is having an elderly cat. He need to take his cat to
Vet nary once in a week. As a courtesy doctor bills him once in a month rather than making him pay at every visit.
place Dont give your credit card number on phone or online unless you initiate the call. Remember to get your card and receipt after the transaction If your billing is wrong intimate this to card issuer If dont receive the bill notify them immediately Report for stolen or lost card immediately
statements Read the policies of web sites you visit Keep your personal information private Never give your password online
= Monthly Debt Payement / Net Monthly (not including house payement) income 20% estimate is maximum, however 15% is much better.
Debt-to-equity ratio = Total liabilities / Net Worth
If Debt equity ratio is 1 it means debt is just equal your net worth
Because Davis has been denied a loan, under consumer credit protections acts he has the right to know the specific reason for the denial. If the denial is because of a credit report, he can apply to get a free copy of his credit report within 60 days of the denial. As of 2005, all consumers can get a free copy of their credit report
Objective 4: Information creditor look for when you apply for loan?
Character: his/her attitude towards credit
obligations
Capital: his/her asset or net worth Collateral: A valuable asset pledged to secure a
loan
that you returned to the store or never received.? Has a credit company ever charged you for the same item twice or failed to properly credit on your account? Steps are: Pay your debts on time. Correct billing mistakes : notify the creditor in writing within 60 days of your bill being mailed to you, give your creditor your name , account number and bill. Creditor should report to your letter within 90 days and correct your account.