CHAPTER 4 : CONSUMER CREDIT (FIVE WARNING SIGNS THAT INDICATE YOUR DEBT…
CHAPTER 4 : CONSUMER CREDIT
Suggestion to prioritize your financial goals and there are steps to be taken
Create an emergency fund as a reserve fund that will help you pay the unexpected expenses in order to not use a credit card.
Pay off all your debts totally except the mortgage.
Build up an emergency fund with three to six months' worth of living expense for unexpected problems such as a medical emergency or loss of a job.
Open credit that is available
Retail charge card
Revolving Credit Lines
allows a person to buy goods and services on credit.
DISADVANTAGES OF CREDIT CARDS
Easy to get in debt.
The risk of fraud.
Costs related since interest charged to outstanding balances can be very high. May need to pay for penalty due to late payments, annual fees and if making cash withdrawal, the interest is calculated from the day the cash is withdrawn.
ADVANTAGES OF CREDIT CARDS
Provide a means for credit
Source of cash through cash advance.
Easier to use.
Convenient since there is no need to carry cash
Loss protection ; if you lose your credit card, call the issuing bank, cancel the card and you will get a new one.
FRAUD PREVENTION ON CREDIT CARDS
When using your card at retail outlets, protect your card as of if it was cash and ensure that it is in your possession at all times. Check the charge slip and its amount.
Safeguard your Personal Identification Number (PIN).
Check your credit card statement and report immediately if there are any transactions that you do not recognize or are unauthorized by you.
If the card is stolen or lost, immediately report to your bank.
Notify the bank if there are any changes in address.
FIVE WARNING SIGNS THAT INDICATE YOUR DEBT MIGHT BE BUILDING TO A CRISIS
Paying one debt with another
Your minimum monthly payments are large.
You make minimum payments.
You are not building your savings.
FINANCIAL CHARGE ON CREDIT CARDS
Interest is charged on credit card balances rolled over beyond the payment due late, The percentage, or interest rate can vary from card to card.
Charges on Cash Advance
Credit cardholders can get a cash advance from bank branches or through ATM if cash is needed urgently. The amount cash advance is deducted from available credit line. A fee is often charged when obtaining cash advances.
Annual fee helps to offset costs that issuers incur in maintaining accounts. The amount of annual fees depends on the type of card and the credit card issuer.