Unit8:CreditCardsandShopping

Online

PersonalFinancialLiteracy

Objectives

•  Comparecostsandbenefitsofusingcreditcards.

•  Analyzedifferencesamongcreditcards,andtheimportanceofcomparisonshoppingforacreditcard.

•  Listfeesassociatedwithcreditcards.•  Discusstheimportanceofpayingoffacreditcardonorbeforethepaymentduedate.

Objectives-Continued

•  Selectfromalistbenefitsofonlineshopping.•  Listwaystoprotectyourselfwhenshoppingonline.

CreditCardBenefits

•  Goodoptionwhenpayingforsomethingthatwillgoupinvalue

•  Cantakeadvantageofsalesandspecialoffers•  Convenience;don'thavetocarryaroundlargesumsofmoney

•  Bonuspoints,cashrebates •  Establishaconsumer'screditrating

CreditCardBenefits-Continued

•  Simplifyrecordkeepingwithstatements

•  Creditcardcompanycanhelpwithrefunds;limitsliability

•  Canusegoodsandserviceswhilepayingforthem

•  Availableforemergencysituations

CreditCardCosts/Disadvantages

•  Canbecomeahabit•  Contributetoimpulsebuying•  Paymoreforitemsthanyouwouldwithcashifyoudon'tpaythemoffeachmonth

•  Lateormissedpaymentsdamagecreditrating•  Creditproblemsleadtohigherinterestrates

CreditCardCosts/Disadvantages-Continued

•  Mayspendmorethanyouearn•  Encourageoverspending•  Tieupfutureincome•  Dangerofcreditcardfraud•  Identitytheft

TypesofCreditCards•  Affinitycard–eachtimethecardisusedaportiongoestothe

organizationnamed(suchasairlines,universities,professionalorganizations,sportsteams,shoppingcenters)andincludesthelogooforganizationoncard

•  Co-brandedcard–brandedwithnetworkprocessor(suchasVisaorAmericanExpress)andretailer(BestBuy,Cabelas)

•  Prestige-statuscard–invitationonly(ChaseSapphirePreferredCard,CapitalOneVentureRewards,MasterCardGoldCard)

•  Smartcard(includesmicroprocessor)

InterestRates

•  AnnualPercentageRateorAPR•  Appliedtounpaidbalanceaspartoffinancecharge

•  Nointerestonnewpurchasesduringthegraceperiod

•  Aftergraceperiod,financechargesapplybasedonaccruedinterestfromthedayofpurchase

UniversalDefaultClause

Thingsthatcanraiseinterestrate:•  Latecreditcardorbillpayment•  Gettinganewmortgageorcarloan•  Goingovercreditlimitonorusingoverhalfofcreditline

•  Toomanycreditaccounts•  Applyingforcredit•  Toomuchdebt

20/10Rule

•  Totalcreditcarddebt—Don’texceed20%ofannualtake-homepay.

•  Monthlydebtpayments–10%orlessofmonthlytake-homepay.

OnlineShoppingAdvantages

•  Placeorderswithoutleavinghome •  Shopanytimeofday •  Compareselectionandprices •  Findproductsthataren'tavailablelocally •  Nosalestaxesattimeofpurchase*Lawchanged

•  Noaggressivesalespeopleorcrowdstodealwith•  Noworriesaboutparking;savesgas

OnlineShoppingDisadvantages

•  Can'tinspectitemsbeforebuying

•  Waitfordelivery•  Mustaddcostofshippingandhandling

•  Encouragesimpulsebuying•  Difficulttodeterminereliablesellers

•  Securityissuescanputcreditcardinformationatrisk

OnlineShoppingDisadvantages

•  Lackofindividualcustomerservice•  Canaffectthelocaleconomyadversely•  Returnsmaybemoreofahassle,andsometimesincludeshippingcosts

OnlineSecurity

•  Physicaladdress,phonenumber•  Privacypolicy•  Returnandrefundpolicy•  Readproductdescriptions•  Avoidphishingsites•  Lockicon•  Https

OnlinePayments

•  Termsofagreement•  Privacypolicyandsecurity•  Bewareofpaymentservicewebsitethatlooksunprofessionalorisbasedinanothercountry.

•  Callpaymentservicetoverifyonlineidentify•  Paybycreditcard

OnlinePayments-Continued

•  Knowtotalcost•  Savecopyofreceipt•  Don’tallowwebsitetosavecreditcardnumber

UnitReview1.  Explaintheconceptof“borrowingtospend.”2.  Distinguishbetweencreditcardcreditand

vehicleloancredit.3.  Howarepeopleencouragedtousecreditcards?4.  Compareandcontrasttheadvantagesand

disadvantagesofusingcreditcards.5.  Explainthedifferencebetweenprivatelabel

cardsandgeneralpurposecards,givinganexampleofeach.

UnitReview-Continued6.  Nameatleastthreetypesofgeneralpurposeof

creditcards.7.  Describehowcreditcardinterestrateswork.8.  Howcanyouavoidpayinginterestwhenyou

useacreditcard?9.  Whatistheproblemwithonlypayingthe

minimumpaymentonmonthlycreditcardstatements?

10. Whataresomeofthefactorstoconsiderwhenshoppingforacreditcard?

UnitReview-Continued11.  Explainhowcreditcardcompaniesuse

incentives,andisthisagoodpractice?12.  Describefeesassociatedwithcreditcards.13.  Discusswhypeopleliketoshoponline.14.  Describesomeofthedisadvantagesof

shoppingonline.15.  Whatfactorsareimportantwhenshopping

online?

UnitReview-Continued16. Howcanyoutellifyou’reshoppingata

securedsite?

17. DiscussthecreditchangesrequiredbytheCARDAct.