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.
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