Download - Credit Vs. Debit cards

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Credit Vs. Debit cards

What are Credit Cards?

Pre-approved credit which can be used for the purchase of items now and

payment of them later.

Why Use a Credit Card?

$ Proper use can help establish good credit rating

$ Conveniently accepted across United States and abroad

$ Emergency buying power$ Additional form of identification$ Record of purchases on bill statement$ Often required to hold a reservation

Why Not Use a Credit Card?

$ Improper use can damage credit rating$ Higher risk for impulsive buying and overspending$ Debt trap when used unwisely$ Expensive way to borrow due to high interest

rates$ Less to spend in the future due to paying off

purchases from past$ Possible hidden fees & surcharges$ Privacy is an increasing concern$ Identity theft easier

Obtaining a Credit Card

$ Comparison shop when choosing the right card

$ Know the facts¢ Terms and conditions of credit card accounts

differ¢ Be aware of “hidden” costs of card(s)

$ Federal Truth in Lending Act¢ Requires card issuer to display the cost of

credit card¢ Schumer Box: easy to read box format

A Schumer Box you May Expect To See

Annual Percentage Rate for purchases and balance transfers*

2.99% APR (.00819% daily periodic rate) on purchases and balance transfers until the first day of the billing cycle that includes the six (6) month anniversary date of the opening of your account. In the absence of the introductory rate, 12.99% APR(.03559% daily periodic rate) on purchases and balance transfers.**

Grace period for repayment of the balance for purchases

You will have a minimum of 25 days without a finance charge on new purchases if the total New Balance is paid in full each month by the statement closing date.

Method of computing the balance used in calculating finance charges for purchases

Average daily balance (including new purchases)

Annual fee $25

Minimum finance charge For each Billing Period that your Account is subject to a finance charge, a minimum total Finance Charge of $0.50 will be imposed.

Miscellaneous fees Cash advance fee: 2.5% of amount of the cash advance, but not less than $2.50.Late payment fee: $25 Over-the-credit-limit fee: $25 Returned check fee: $25

$ Annual Percentage Rate (APR): interest rate charged for amount borrowed in terms of percentage per year

$ Grace Period: amount of time allowed before finance charges (interest or cost of credit) are applied

Annual

Percentage Rate for

Purchases

 Grace Period

for Purchase

s

Minimum Finance Charges

Balance

Calculation

Method for

Purchases

 Annual

FeesTransaction Fees for Cash Advances

 Late

Payment Fees

 

19.9% 

 

Not less than

25 days 

$.50 when a finance charge at a periodic

rate is charged

Average daily

balance method

(including new

purchases)

  

$20 per year

 2% with a minimum fee of $3

 

$29

A Schumer Box and Credit Card Terms Explained

$ Minimum Finance Charge: minimum amount charged for card use

$ Balance Calculation Method: method used to determine balance including finance charges

Annual

Percentage Rate for

Purchases

 Grace Period

for Purchase

s

Minimum Finance Charges

Balance

Calculation

Method for

Purchases

 Annual

FeesTransaction Fees for Cash Advances

 Late

Payment Fees

 

19.9% 

 

Not less than

25 days 

$.50 when a finance

charge at a periodic

rate is charged

Average daily

balance method

(including new

purchases)

  

$20 per year

 2% with a minimum fee of $3

 

$29

A Schumer Box and Credit Card Terms Explained

$ Annual Fees: yearly charge for credit card ownership

$ Cash Advance Transaction Fees: cash withdrawal fees

$ Late Payment Fees: penalty fee for payments not made by the due date

Annual

Percentage Rate for

Purchases

 Grace Period

for Purchase

s

Minimum Finance Charges

Balance

Calculation

Method for

Purchases

 Annual

FeesTransaction Fees for Cash Advances

 Late

Payment Fees

 

19.9% 

 

Not less than

25 days 

$.50 when a finance charge at a periodic

rate is charged

Average daily

balance method

(including new

purchases)

  

$20 per year

 2% with a

minimum fee of $3

 

$29

A Schumer Box and Credit Card Terms Explained

Opening a Credit Account

1. Applicant completes a credit application2. Lender conducts a credit investigation3. Applicant is given a credit rating4. Lender accepts or denies the credit request5. If accepted, applicant evaluates the credit

card details (USE THE SCHUMER BOX!)6. Applicant accepts or refuses credit terms

Understanding the Bill

$ Minimum Payment Due: minimum amount to be paid ¢ If this amount is paid and a balance is left on

the account, additional finance charges will be included in the following month’s balance

$ Past Due Amount: the previous amount due which was not paid before the due date

$ Due Date: the day by which the company requires a payment to be made

$ New Balance: the total amount owed on a credit card

Understanding the Bill (continued)

$ Credit Line: the maximum amount of charges allowed to an account

$ Closing Date: last day for transactions to be reported on the statement

$ Charges, Payments, and Credits: the transactions which occur with the use of a credit card

$ Finance Charge: charges assessed for credit card use

Using a Credit Card Properly

$ Only use when there is no doubt about ability to pay-off the charges at the end of the billing cycle

$ Record all expenses and keep receipts $ Check credit statement for errors $ Always pay off balance completely and

timely

Sign card with signature and “Please See ID”

Do not leave cards lying aroundClose unused accounts in writing and by

phone, then cut up the cardDo not give out account number unless

making purchasesKeep a list of all cards, account

numbers, and phone numbers separate from cards

Report lost or stolen cards promptly

Safety Tips

Are Debit Cards a type ofCredit Card?

NO!

Debit=Credit

Debit cards allow payment and purchase

to happen simultaneously

Debit Cards are:$ Not the same as

credit cards$ Not a form of credit

at all$ Directly linked to

your bank account.

What are debit Cards?

Debit card is a plastic card which provides a alternative payment method to cash when

making purchases.

Why Use a debit Card?

$ It is used instead of a check to make purchases, anywhere Visa is accepted

$ It is used instead of a credit card to pay bills such as utilities, insurance and car payments

$ Point-of-sale funds are drawn from primary checking account

$ PIN-system security $ Change your PIN at any Merchants Bank

branch $ No annual fee $ Choose from three card designs

Why Not Use a debit Card?

$ Some banks are now charging over-limit fees or non-sufficient funds fees based upon pre-authorizations.

$ Many merchants mistakenly believe that amounts owed can be "taken" from a customer's account after a debit card (or number) has been presented.

$ In some countries debit cards offer lower levels of security protection than credit cards.

This highly competitive market has resulted in impressive card growth

-20%

0%

20%

40%

60%

80%

100%

120%

140%

Debit CardsCheques

Cash

High take up of cards

Credit Cards

Cash is the largest volume

129%

-11%

+11%

+20%