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CREDIT / CREDIT CARD HELP

Credit Card Terms
What happens if I fall behind in my credit card payments?
Why should college students have a credit card?
What steps do I take to establish a good credit rating?
Questions to ask yourself to determine what the best card is for you?
How can I protect myself from identity theft in today’s world?

Credit Card Terms / Credit Help

APR (Annual Percentage Rate) - A yearly interest rate which includes all fees and costs associated with obtaining a loan. Disclosure of APR is required by law. It is calculated so that borrowers can take advantage and compare the APR of prospective lenders.

Air Miles - accumulated by use of airline affiliated cards to obtain miles calculated monthly.

Amount Financed - Total Amount being loaned to borrowers which could include cost plus other fees.

Application Fee - A fee associated with processing the application of a borrower to lender oriented jobs to determine eligibility.

ATM Access Fee - A fee associated with the borrower which can be accessed for ability to access monies from an automated teller machine.

Balance Transfer - A way to move an amount of unpaid fees to another card.

Balance Transfer Fees - A fee associated with the process of balance transfer used to entice/defer borrowers to transfer balances.

Billing Cycle - The number of days between old payment and current payment of billing.

Billing Statement - The monthly bill which gives pertinent summary information of the month’s activity and bill due date.

Cash Advance Fee - The fee associated with accessing cash where they is no grace period which entails generally higher rate charges which can be accrued at time of cash withdrawal or on next billing statement.

Closed Account Fee - Fee associated with early termination of an account.

Consumer Credit Counseling Service - Programs which are able to work with creditors and borrowers to work out ways to repay debt over a reasonable amount of time.

Credit History - A historical look at a borrower’s payment record.

Credit Limit - The maximum allowable limit of a credit account. Suggested limits do not exceed the amount of 20% of income.

Credit Rating - A decision based upon someone credit score.

Credit Report - A look at a person’s spending and saving habits to determine loan eligibility.

Credit Score - Number calculated between 300 - 800 based upon a person’s credit history.

Credit Union - A financial institution that serves like a bank which can offer lower rates. It is usually owned by the people who do business with it.

Debit Card - A card that is directly related to a borrowers account.

Debt Consolidation - Means of combining multiple loans to one loan with smaller monthly payments to be paid over an extended amount of time.

Discount Rate - Rate at which banks borrow from the Federal Reserve. To the banks advantage to keep a low discount rate because discount rate is disclosed for borrower comparisons.

Down Payment - An initial payment to get an account started in exchange for goods or service.

Electronic Funds Transfer (EFT) - Way of electronically transmitting funds to pay for payments electronically.

Effective Federal Funds Rate - Interest rate that the Federal funds are traded at on an average basis which can change daily.

Encryption - Use of technology to scramble information in regards to private and financial information so that only specific user can view information.

Federal Deposit Insurance Corporation (FDIC) - An agency which determines the safeguard of each personal account up to a specified financial amount which is required of all national banks for protection of borrowers.

Finance Charge - The cost of being able to use a credit card which consists of fees and interest related fees.

Grace Period - A period of time that the lender offers to the borrower where there is no interest accumulating between transaction date and billing date. The average grace period is between 20 - 30 billing days.

Gross Income - The total income earned before taxes.

Interest - A portion of the money used by a borrower for lending fees

Interest Rate - The percentage rate at which loans are charged per year.

Internet Bank - A bank that is accessed on the internet which usually produces lower debts.

Introductory Rate - A lower interest rate which is charged to new customers to suit their borrowing needs. Usually for a specific time period of days and once over, the borrower’s rate is increase to their standard rate.

Late Charge/Fee - A fee accessed to the borrower for not paying by the due date.

Line of Credit - A form of agreement that will let a borrower spend up to a maximum limit based upon a borrower’s credit history.

Minimum Payment - The minimum amount to be paid to keep an account active without late fees. The usual rate is about 2% of the balance.

Online Bill Payment - Offers the ability to setup bills to be paid automatically and virtually without the use of hardcopies such as envelopes, stamps, and checks.

Over-the-Limit Fees - A fee accessed for going over the credit limit.

Penalty Rate - An increased APR due to excessive amounts of late payments.

Prime Rate - Rate at which banks will lend money to its most favorable borrowers.

Principal - The amount of money which has been borrowed.

Remaining Term - The amount of time it will take to pay off the loan.

Secured Card - A card that is secured with a savings account attached to the card for the ability to make payments on. Usually used to establish or build good credit.

Secured Debt - The ability to have a property reprocessed in case of non payment.

Transaction Date - The date of exchange of monies for a product.

Unsecured Debt - Debt that does not require any collateral.

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Q. What happens if I fall behind in my credit card payments?

A. You can receive a negative on your credit history which will stay there for up to 7 years even if eventually it is paid off in full. This poor credit history can affect your ability to rent an apartment or buy a car because of your spending and payback history. Insurance companies will also be less likely to give you discounts for having good credit history.

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Q. Why should college students have a credit card?

A. Credit cards can be seen as useful to college students because they can learn how to use them correctly. Proper use of credit cards and on time payments within one’s credit limit can help them to establish good credit so that when its time for them to graduate they can do certain things such as rent an apartment in their name without having a parent to co-sign or have to pay a huge deposit. They will be able to take advantage of having good credit at an early age while learning how to balance their spending with their ability to make their own money.

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Q. What steps do I take to establish a good credit rating?

A. 1. Determine your own budget. Often times we get caught up with wants and needs, but the ability to manage our own money is just as valuable as making it.

2. Use it rarely. Do not use your credit card for frivolous spending such as fast food or restaurant bills. Use it for purchases that will mean something to you such as a computer or somewhat large purchases so that the interest will be on one rather than multiple smaller things.

3. Pay on time. Be sure to keep up on your monthly payments to avoid things like late and penalty fees. Try to set up a day for each month on that same day to sit down and pay bills, this will help with the consistency of knowing when to pay and how much you have paid on our balance.

4. Avoid things such as ATM access fees and cash advance fees. Things options are good features to have on a credit card, but may limit your ability to pay the bill when it comes because interest starts to calculate as soon as your receive the cash at very high interest rates. Too many cash advances can really set you back once you receive your bill.

5. Pay more than minimum. Try to map out your bill payments to be as much as possible over the minimum. By paying more of the debt as early as possible you can reduce your interest payments. Some cards even offer promotions that if you pay within the grace period no interest will be accessed which is to your advantage.

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Questions to ask yourself to determine what the best card is for you?

  • What is the introductory rate and how many months does that rate last until it increases to the stated rate?
  • What exact fees are associated with the card? Meaning does it have over-the-limit fees, applications, ATM, transfer balance, late, or yearly fees?
  • How long is the grace period?
  • If I go over my limit how will I know? And what can I do to get back under my limit?
  • How long do the payments have to be consistently coming in before I can raise my limit?
  • What is the best APR that you can offer me based upon my credit history/score?
  • What solutions could the company help me with if I was unable to pay my balance? For example, how could they help me to get back on track paying them on time in full of at least the minimum payment?
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How can I protect myself from identity theft in today’s world?

This is a question that is asked by many people today because the age of technology is so advanced that it seems like there are not absolutely ways of keeping your personal information completely confidential. There are ways to help safeguard your credit history and personal information.

As with any confidential information keep it on a “need to know” basis. The best way is to always safeguard yourself by asking the simple question of, “Why do you need my social security number?” Your social security number is something that is your identification number to everyone else and unfortunately if in the wrong person’s hand they could do some damage to you. Always be on guard about your social security number.

Next, keep a good eye on your credit history or reports. You can access them by the three major credit history companies (Equifax, Experian, and TransUnion) for a small fee in most states for about nine bucks. Check credit reports at least once every six months and all three credit agencies may have different reports (a reminder to keep in mind).

Monitor closely all your open accounts and check recently closed accounts to protect yourself for any activity that you didn’t approve. Don’t be hesitant to dispute an approval or file a claim. Most of the time your credit card company will take your side in a case based upon the Fair Credit Billing Act.

Remember to shred any receipts, pre-approved offers, statements after use of them so that it can not be read by anyone. Also, check those documents so that they match your name and current information as you have told or wrote them exactly.

If you are conducting business via the Internet upon purchasing, always check to make sure that there is a padlock in the right bottom side of the web page that shows the website is secure and encrypted while you’re at the site. A secure website can also be identified by an “https://” in the address bar rather than “http://.”

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