CM - Credit Management Module Overview

Credit Management Module Overview

Introduction

Think about your favorite television shows both regular and reality and think about one of the characters purchasing something that they really wanted. How did they pay for their item(s)?

They probably just swiped a credit card. They made it look so easy and fun to get whatever they wanted by using their credit card. This is great until the bill comes and the total seems to be way more money than the original purchase price. Having a credit card is a necessity during this time when online shopping is the best way to get a deal and make a purchase, but you must be smart about it. In this module, you will learn about the advantages and disadvantages of using credit, how to build credit, what laws are in place to protect you regarding credit, and why it is important to check your credit report regularly. Anxious to get started? Let's go!

 

Essential Questions

  • What are the advantages and disadvantages of various payment methods?
  • What are the advantages and disadvantages of using credit?
  • What factors affect your credit worthiness?
  • What behaviors can improve or hurt your credit score?
  • How do consumer protection laws benefit the buyer?
  • Who uses your credit report and why?

 

Key Terms

  • credit: the ability to make purchases with the promise that the money will be repaid later
  • credit card: a card issued by a bank, retail store or business that allows the card holder to repeatedly purchase products and services on credit
  • credit limit: the maximum amount of money that a credit card issuer will allow you to charge
  • charge: monies borrowed using a credit card
  • interest rate: the percentage you pay on the money you have charged
  • debit: withdrawal from your account
  • interest: money paid to you by the bank for being able to use your money
  • interest rate: percentage you are paid for your money
  • annual percentage rate/APR: yearly rate of interest calculated by multiplying the monthly interest rate by 12 (number of months in a year)
  • creditworthiness: an assessment of the likelihood that a borrower will default on their debt obligations. It is based upon factors, such as their history of repayment and their credit score
  • credit report: a report detailing an individual's credit history, including payments related to bills, loans, credit accounts and bankruptcies used to determine one's creditworthiness
  • credit rating: a ranking, typically expressed as a number or letter, based on one's credit history and used by financial institutions for loan and credit approval
  • credit reporting agencies: this term refers to businesses that maintain historical information pertaining to credit experience on individuals or businesses (i.e. Transunion, Experian, and Equifax)
  • minimum payment: the least amount you can pay on the card and still keep your account in good standing, typically, a percentage of what you owe on the outstanding loan or some pre-set minimal amount if your balance is low
  • truth in lending act: requires lenders to explain how they compute loan charges and list the annual percentage rate also gives the borrower three business days to opt out of the loan
  • fair credit billing act: protects against incorrect billing
  • fair credit reporting act: gives consumers the right to dispute inaccuracies on the credit report
  • fair debt collection practices act: prevents abuse from professional debt collectors
  • default: failure to meet a financial obligation such as repaying a loan
  • grace period: time in which a debt may be paid without accruing further interest or penalty
  • annual fee: credit card fee that you pay every year in addition to interest just for having the credit card
  • late fees: credit card fee assessed to the bill if it is paid late
  • over the limit fees: credit card fees assessed if you charge more than your credit limit allows
  • balance transfer fees: credit card fees for transferring debt from one credit card to another usually for lower interest rates
  • cash advance fee: credit card fees assessed for withdrawing cash from the credit card

 

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