Personal finance word credit card

CREDIT CREDIT CARD Chapter 67 Group 2 Lâm Bình Chi Lê Thị Minh Hiếu Đoàn Ngọc Yến Nhi Nguyễn Lê Anh Quân Tháng 092021 1 | P a g e Group 2 Contents I Introduction 2 II Advantages and disadvantages of using credit 3 1 Advantages 3 2 Disadvantages 4 III Step for getting credit from a bank 5 1 Personal loan 5 2 Receiving credit card 7 IV Types of consumer credit 9 1 Non installment Credit 9 a) Open ended Credit (revolving credit) 9 b) Service credit 10 c) Single payment loans 10 2 Installment cred.

CREDIT

CREDIT CARD

Chapter 6&7

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Group 2

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Lâm Bình Chi

Lê Thị Minh Hiếu Đoàn Ngọc Yến Nhi Nguyễn Lê Anh Quân

Contents

I Introduction: 2

II Advantages and disadvantages of using credit 3

1 Advantages: 3

2 Disadvantages: 4

III Step for getting credit from a bank: 5

1 Personal loan: 5

2 Receiving credit card: 7

IV Types of consumer credit: 9

1 Non-installment Credit: 9

a) Open-ended Credit (revolving credit) : 9

b) Service credit: 10

c) Single-payment loans: 10

2 Installment credit (also called closed-end credit) : 10

V What is credit cards? How to use credit card effectively: 12

1 About credit cards: 12

2 How to use credit cards effectively 12

I Introduction:

Credit:

An arrangement in which goods, services, or money is received in exchange for a promise to repay at a future date

You are likely to use credit to buy housing and vehicles as well as use credit cards However, paying high interest rates and overuse of credit impedes your financial success

There are valid reasons for using credit You should credit only when necessary, pay low interest, make repayments on time, and repay amounts owned as quickly as possible

II Advantages and disadvantages of using credit

1 Advantages:

For convenience Using credit cards simplifies the process of making so many

purchases Using credit cards when you travel or shop is more convenient than carrying cash It also provides a handy record of transactions Using a credit card also may give you some bargaining power if there is a dispute or disagreement involving a purchase However, convenience use is justified only if the card balance is paid in full each month

For emergencies Unexpected costs such as car repairs or emergency medical can

be solved quickly with credit

To make reservations Credit can be used to make a reservation Most hotels, car

rental agencies require some form of deposit to hold a reservation A credit card number can serve as such a deposit, allowing guaranteed reservations to be made over the telephone In many cases, the hotel will notify the credit card issuer to put a hold on your account for the anticipated total amount of the charge

To take advantage of free credit Merchants sometimes offer free credit for a

period of time as an inducement to buy Known as “same as cash” or “interest – free” terms, these programs allow the buyers to pay later without incurring finance charges Sometimes, you will get a better service on something bought on credit (without any problem arises)

To own expensive items sooner If you can not afford to pay for a large purchase

(ex: car, house, phone, etc), using credit allows you to get it now Many expensive items would not be purchased without the opportunity to pay for them over time The expected life of the product should be at least as long as the repayment period on the debt

For protection against rip – offs and fraud Internet and telephone purchases

made on a credit card can be contested with the credit card issuer under the guidelines

of the Fair Credit Billing Act The protections afforded by the FCBA are not available when using a debit card

To obtain an education The high cost of education has forced many students to

use student loans This may be one of the better uses of credit, as the borrower is investing in himself or herself to raise the quality of life and / or income in the future

2 Disadvantages:

Interest itself is costly Interest represents the price of credit It is the rent you pay

while you use someone else’s money Interest makes up the finance charge, which is total money paid to use credit (including interest and any other required charges such

as a loan application fee)

Credit reduces your financial flexibility and buying power Using credit gives

you the loss of financial flexibility in personal money management And the money to have to pay monthly on your debt is money you could spend elsewhere on other opportunities People rarely go through life without taking on debt from time to time, while repaying debt for years to years is not a smart decision Credit can be seen as the promise for you to “work for creditor” in the future to pay off your debt

It is tempting to spend more money Depending on the advantage of credit that

you can get more expensive item quickly, its use can lead to overspending By simply having a credit card available, it can become a habit and people are likely to spend more when shopping than when paying cash for everything Using a credit card to buy something expensive and paying off with interest per month may seem less painful than paying cash or spending less money on clothing This tendency to spend more is why sellers promote buying on credit so heavily

Overindebtedness is a real possibility Consumers have to pay the interest on

their debt monthly They teeter on the brink of disaster If they begin missing payments, they run a high risk of a poor credit reputation, damage to employment prospects, an increase in rate paid for insurance, difficulty in renting or buying a home, and the possible repossession of some purchased item

III Step for getting credit from a bank:

1 Personal loan:

Step 1: Receipt of loan documents

Before receiving the loan application, the credit officer will determine and clarify the loan purpose of the customer, then preliminarily verify the customer's financial situation

After determining the purpose and preliminary verification, the credit officer will guide you to prepare a complete set of loan documents according to the requirements and loan conditions of each bank

Each bank will have different requirements and documents, but a basic set of loan documents will include the following documents:

1 Customer Profile

• Valid ID/Passport

• Household registration book / Temporary residence book / KT3 / Proof of permanent residence

• Marriage certificate (if married)

2 Loan application documents:

• Loan application form and capital use plan

• Documents proving the loan purpose

• Documents proving income: Labor contract, payroll statement,

• Confirmation of eligibility for personal loans

Step 2: Appraise personal loan conditions

After receiving the documents that the customer has provided in full, the bank will conduct a review of the documents and conditions for the personal loan

This is considered the most important step in the entire process to verify the accuracy of the loan application provided by the customer, the appraisal will decide whether you are approved for the loan application or not

- Checking documents and loan purposes: Credit officers will check the information of the documents to see if they are complete and accurate, and whether the documents are suitable for loan purposes and personal consumption products or not Will make a request to amend or supplement if the application is not satisfactory

- Check and verify information: The main checking information is whether the information provided by the customer is correct or not, the credit history has bad debt

or not Normally, this operation will be performed through the data system and call the customer directly, or according to the reference phone number provided by the customer

- Analysis and assess the behavioral capacity of borrowers: Determination of the capacity of personnel behavior and civil legal capacity of customers who are eligible to perform loan transactions in accordance with the provisions of current law or not?

Step 3: Credit Analysis

This step is to identify the risks that may occur or arise in order to minimize these risks The content of the analysis will normally include:

- The level of honesty and authenticity of the information provided by the customer

- Credit history, repayment history

- The number of credit institutions with which the customer currently has relations and the customer's ability to pay

From the above information, we will analyze and evaluate the reputation, legal status, financial ability, solvency of customers in the past, present and future After that, the department

Step 4: Approval for personal consumption loans

After reviewing the capital source, payment conditions, method and loan interest rate, the consultant will submit the application file and appraisal report to the review officer for inspection and review can be re-verified (if necessary), then submitted for approval In this step, the credit department relies on the analyzed information and the appraised documents to decide whether to approve the loan or not

If the application is approved, the customer will be notified and signed a personal loan contract

Step 5: Sign the contract and disburse

Once your loan application is approved, the bank or credit institution will issue a loan contract for the customer to sign and disburse The main content of the Contract will include basic information such as:

- Customers: full name, address, legal status

- Purpose of using the loan

- Number of credits

- Interest rates

- Credit period

- Types of guarantees

- Payment terms

After being approved by the director, the accounting department is responsible for disbursing consumer loans to customers However, the credit officer will continue to monitor whether your loan is used for the right purpose If there are signs of fraud or appropriation, the bank has the right to withdraw the loan at any time

Step 6: Collect debt and issue a new credit judgment

This is the last step in the entire personal loan process at the bank When the payment is due, the bank's debt collection department will notify the customer requesting to make the payment on time, this payment will include interest and a part

of the loan principal has been clearly agreed in the consumer loan contract signed by the two parties previously

In case of late payment or insolvency, the bank will consider solvency to have new appropriate credit judgments

The above is the most detailed information related to the personal consumption loan process at the bank Understanding and thoroughly grasping the above information will help you easily prepare a complete application and the ability to get a loan Loan approval will be higher

2 Receiving credit card:

Step 1 – Receive the customer profile to open the card

Customers wishing to open a card need to prepare all the necessary documents including:

- Credit card application form and card usage contract according to the bank's form

- ID card / Citizen ID card

- Proof of residential address

- Income proof documents:

After preparing all these documents, customers can go to branches/transaction offices of banks that need to issue cards nationwide to request the issuance of a credit card with an appropriate credit limit

Step 2 – The bank conducts verification of the credit card issuance

The purpose of credit card appraisal is for the bank to check the authenticity of the information provided by the customer, the customer's ability to repay

Some of the factors that determine the bank's decision on whether you pass the credit card appraisal process include:

Stability of the work you are doing:

Guaranteed minimum income:

Credit history:

Debts that reduce financial viability:

Step 3 – Grant credit card limit

If the customer profile is eligible, the bank will conduct a classification to grant a credit line

Step 4 – Issuing credit cards to customers

The bank will create customer information and credit card issuance information

on the management system, encrypt this information on the card and request the cardholder to register a sample signature at the bank

Step 5: Send a notice of completion of card issuance and card return to customers

IV Types of consumer credit:

- Modern consumer credit is diverse enough that it can be classified in many ways Probably most familiar in conversation is by intended use of the funds Common uses include automobile credit, student loans, boat loans, mobile home loans, home improvement loans, furniture credit, debt refinancing, and so on There are some complications with this familiar form of referring to credit use, however, that go to the very heart of the reasons for using consumer credit in the first place

- For descriptive purposes, it is common to say that consumers use consumer credit for such and such a purpose, including all those mentioned above and others Many people owe on auto loans, student loans, and other obligations that they acquire as they purchase household assets and education and refinance other debts There are 2 types

of consumer credit: Installment credit and non-installment credit

1 Non-installment Credit:

- Non Installment consumer credit is largely of historical interest today, it once was an important factor in consumer credit At that time, and conceptually even today,

it consisted of three components: charge accounts at merchants and dealers, service credit, and single-payment loans

- This type of credit is the simplest and is usually offered for short term use, such

as 30 days The buyer makes one payment at or before the end of the credit period This kind of credit enables consumers to take possession of property immediately and pay for it within a short time Many department stores offer non-installment credit to their regular customers; this enables the store to make sales and get the money in the near future, thus generating better cash flow for the business than might otherwise occur

- Non-installment credit can also be secured or unsecured; it requires you to pay the entire amount due by a specific date For example, when you get your cell phone bill each month, it says “payable in full upon receipt” That means you owe the entire amount at one time Bills from the cable company, your doctor and other service providers are often non-installment credit requiring a “lump sum” payment

- Non-installment credit includes single-payment, open-ended credit and service credit

a) Open-ended Credit (revolving credit) :

- In the case of revolving or open-end installment credit, both the credit amount used and the size of the monthly payments are at the option of the consumer, as long as

the amount does not exceed the credit line or limit and the consumer makes at least some required minimum monthly payment

- Consumers can arrange credit in advance and use it at the pace and in the manner they please They do not have to negotiate a new contract with a creditor every time they buy a new appliance or hobby item that they would prefer to pay for over a few months or longer Consumers appear to prefer revolving credit for its convenience

- The primary access devices in open-ended credit arrangements are the credit card and special checks sometimes referred to as loan checks or, by the issuers, as convenience checks

- Open-ended credit can be used to make purchases and to obtain cash advances

A credit card is a plastic card identifying the holder as a participant in the charge account plan of a lender, such as a retailer or financial institution

b) Service credit:

- Service credit consists of amounts owed by consumers to service providers such

as doctors, dentists, lawyers, plumbers, and other service professionals who do not demand immediate payment on the spot And like charge accounts, service credit has become less common as professionals today typically prefer to accept credit cards for payments to minimize the accounting and record keeping necessary for maintaining their own billing operations

c) Single-payment loans:

- Single-payment loans are made directly to individuals by banks, insurance companies, stock brokerage firms, and other institutions to finance a variety of lumpy expenditures, including medical expenses, education, and payment of taxes Often, such loans are made to individuals with financial assets such as stocks, other securities, or cash-value life insurance policies that can be pledged as collateral for the loan

2 Installment credit (also called closed-end credit) :

- Installment consumer credit is consumer credit repayable in a series of payments, known as installments, usually monthly There are two basic kinds of installment credit: non revolving, or “closed-end,” installment credit and revolving, or “open-end,” installment credit

- For example, if you purchase a sofa and chairs at a furniture store, the store might give you credit up to the full amount of the sale, which will be repaid with interest, but the store does not make further credit available to you under that agreement The full