Foolproof Module 5 notes Questions and Answers 100- Correct

Foolproof Module 5 notes Questions and Answers 100- Correct You need to know who might protect you if you get ripped off. Who regulates and watches all this checking account and financial transaction stuff? The Federal Reserve Bank (aka "The Fed") You probably won't ever deal with the Federal Reserve directly. - The Fed isn't actually a bank you can walk into and deposit your paycheck. It is the central bank of the United States, created and overseen by Congress. It provides our country with a safer, more flexible and more stable monetary and financial system. The "Fed" mainly sets interests rates — the price everyone pays to borrow money. The Office of the Comptroller of the Currency (OCC) -You won't have to deal with these people. The OCC regulates and supervises all our banks, credit unions and other financial institutions. The Federal Deposit Insurance Corporation (FDIC) - The FDIC is actually really important for you. The FDIC protects your money when you put it in a financial institution. For instance, if a financial institution goes broke, the FDIC generally makes sure you get your money back (as long as it isn't over $250,000). National Credit Union Administration (NCUA) The NCUA does all that regulatory stuff for credit unions, instead of banks. The Consumer Financial Protection Bureau (CFPB) - You can connect directly with the CFPB if you think you've been treated unfairly when it comes to money stuff. They oversee financial products and services that are offered to consumers. They make sure the banks stick to the rules and treat consumers fairly. Pretty straightforward, right? Consumer Financial Protection Bureau (CFPB) This is an organization of national bank examiners, charged with maintaining the data and soundness of the banks they supervise. Federal Deposit Insurance Corporation (FDIC) This agency preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions for at least $250,000. Federal Reserve Bank (The Fed) This is the United States central bank. It helps maintain high U.S. employment and stable prices for consumers. The Office of the Comptroller of the Currency (OCC) This agency writes and enforces rules for financial institutions, examines both bank and non-bank financial institutions, monitors and reports on markets, as well as collects and tracks consumer complaints. Big tip. It doesn't do much good to file a complaint, if you haven't kept really detailed records. So, keep records of everything. The Big Difference In Credit Cards And Debit/Atm Cards: With a debit card, you draw out your own money. You spend your own money. You don't get a bill when you spend your own money. Hey, it's your money! With a credit card, you always borrow money. You always create debt when you use a credit card. You always get a bill when you charge something on a credit card. Hey, it's the credit card company's money you're spending. Every time you use a credit card - even to buy a hamburger - you are borrowing money. You get an interest-free loan if and only if you pay off the entire amount of your bill before the end of the grace period. the grace period How many days you have to pay your credit card bill in full before you're charged a lot of interest. Don't delay paying your credit card bill. Pay your credit card bill the day it comes. Pay your credit card bill the day it comes, whether you're paying all the bill or part of the bill. Don't ever charge more than you can pay off each month. Don't get in this trouble again. Your credit limit is the maximum amount you could owe your credit card company. 00:30 01:15 For instance, your credit card company says your credit limit is a $1,000. 00:39 This means you could charge up to $1,000 on your card. 00:44 01:15 credit limit examples Your credit limit is $1,000. 00:53 If you borrow $400 today, you could borrow an additional $600 tomorrow. 00:55 You then owe $1,000. 01:03 You can not borrow any more until you pay down your balance below a $1,000. 01:07 01:15 We definitely didn't say you "should" borrow up to your credit limit. Here's the test fact: Never Borrow Even Close To Your Credit Limit!!! Even if you plan to pay off the credit card loan right away, never borrow even close to your credit limit. Borrowing close to your credit limit will almost always get you in trouble. Credit card companies can penalize you heavily if you go one cent over your credit limit. Credit card companies are famous for doing things that will put you over your credit limit. Credit card companies are famous for putting unexpected charges on your account. Never owe more than 80% of your credit limit. 00:13 00:27 Back Stop Session Forward Here's an example: Your credit limit is $1,000. 80% of your limit is $800. 00:16 So never owe more than that $800 on that credit card In the real world you probably wont pay off your entire credit card balance every month. If this is true, the 80% rule doesn't work for you anymore. You have to use the 20% rule. Never owe more than 20% or your credit limit. Ex: if you have a card with a $1000 credit limit, you should never owe more than $200 on that card. Charge more than 20% and your credit score can fall, even though the credit compant gave you a bigger credit limit. If you constantly charge close to your limit, many credit card compaqnies will raise your interest rate. What Are The Most Important Rules I Should Follow If I Plan To Take More Than A Month To Pay Off My Card? First, try not to get in this situation often. If you need a loan, go to a credit union or bank. Second, pay attention: It's very easy to mess up your credit when you finance your debt using a credit card. watch out for unexpected changes in your credit card contract, and remember to always pay the day you get your bill Dont believe advertising read the fine print pay "as agreed" Don't ever agree to take a credit card, until you know all the details. 01:24 Here's the truth about credit limits and interest rates for loans: Some credit card companies won't tell you your credit limit until after you agree to use their card. You apply for a card, thinking you'll get a $5,000 limit. That's what the ad said. You get a $500 limit. You find out the rotten limit after you get the company's card. Some credit card companies won't tell you the interest rate they charge until after you agree to use their card. The ad said "4 percent loans!" You get your card, and you find out you're charged 25% for loans. You can't cancel the card without spending huge bucks. Who's laughing? Don't get a credit card from any company that won't tell you your credit limit before you get the card. Don't get a credit card from any company that won't tell you your interest rate for loans before you get the card. Guess how it used to be! You owed $500 on your credit card. The interest rate was 9.9%. You charged another $500 on your card. 45 days later, they raised your interest to 15%. You quickly sent in a $500 payment. You're too smart to pay a lot of interest! Here is the trick: The credit card company—until February 2010—applied your $500 payment to the $500 you charged when your rate was 9.9%. You still owed 15% interest on your balance. Get it? They could have paid off the part of your loan at 15% to save you money. They paid off the cheap part of the loan, so that you would still owe them 15%, not 9.9%. Smart! For them. They made out like bandits. You were the one losing the money! Most good changes have been forced on credit card companies. And in one way or the other, many credit card companies are already getting around the good changes. Before you get a credit card, research all the rates carefully. 00:54 A "good" credit card would only charge about 2-5% for cash advances. 00:58 Should you ever get a cash advance on a credit card? 00:03 Check with your company to see what their rates are first. 00:06 If they charge high rates, borrow money from a friend or your parents before you draw cash on your card. 00:08 And what about those cute little checks the credit card company will send you, should you use them? 00:14 00:26 Never! They're much better as paper airplanes! 00:19 00:26 Well, here's a question which obviously isn't stupid. It's pretty important: What should you use your credit card for? You should use it for convenience. You should use it to build credit. You should use it for safety - taking a ton of cash around doesn't make a lot of sense. You should use your card for legal protection, when you pay for products and services. Always use your credit card rather than your debit card if you are buying anything online. So, you can use it for plenty of things, as long as you remember the cardinal rules: Pay your bill instantly. Pay it off every month. Don't use your card to "finance." Use a bank or credit union for that! Back Stop Session Forward Should I Use My Card A Lot, Or Not? If you're really going to be responsible and pay off your card every month, use it a good bit. Activity on your account helps build your credit. Question: How Can I Make Sure I Have The Money Each Month To Pay My Bill In Full? Every time you charge something on your card, 00:24 00:47 Back Stop Session Forward put the same amount of money for that item in your savings account. 00:26 Every time you charge something on your card, put the same amount of money for that item in your savings account. 00:41 00:47