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Credit Card Marketing Act

Credit Card Marketing Act of 2009 (110 ILCS 26/)

Although Eastern Illinois University does not currently maintain any agreements to market credit cards to students pursuing an undergraduate education, or allows its student groups, alumni associations, or affiliates to enter into such agreements, the university has decided to make available, in a conspicuous location, financial education information required by the Illinois Credit Card Marketing Act of 2009.

Consequences of Not Paying Credit Card Balances in Full within the Time Specified

  1. A billing statement will be mailed to you or sent via email. Billing cycles typically range from 29 days to 31 days, but can be shorter or longer depending on your credit card.
  2. If you carry a balance from the previous billing cycle, a finance charge will be applied. The finance charge is calculated using the annual percentage rate, APR.
  3. You must make the minimum payment listed on your billing statement before the payment due date, to be considered current.
  4. If you do not make your payment, you will be charged a late fee.
  5. Increase in interest rate and decrease with credit score.

Explanation of Annual Percentage Rate, or APR

Annual percentage rate (APR) is the total interest rate charged over the course of a year on a loan, credit card or mortgage. The APR tells you specifically how much your loan will cost over the duration of your loan. If your credit card has a 19% APR, you will pay $19.00 for every $100.00 borrowed per year.

This is the most common way finance charges (APR) are calculated:

The average daily balance method uses the average of your balance during the billing cycle. Each day's balance is added together and divided by the number of days in the billing cycle. This is the most common way finance charges are calculated.

Common Industry Practices That Have a Negative Impact to Credit Card Holders

Low Introductory Rates

Can often be referred to as teaser rates. Low introductory rates may be an attractive option, but they last only for a limited time. When the teaser rate expires, the interest rate charged on your balance can jump dramatically.

Credit Card Default

If the borrower does not make payment by the given deadline, or exceeds the credit card limit, the borrower may be considered to be in default. When this occurs, credit card companies may:

  • Raise interest rates to the default (or penalty rate).
  • Decrease the line of credit.
  • Take legal action to enforce payment or to garnish wages.

Complex Timing Calculations

These institutions can and will increase/decrease rates as they please. Some factors can include seasons, holidays, drop in stock market.

Length of Time to Pay Off Various Balances

They pay only the minimum payment due each month, which is usually 2-3% of the balance. The following charts show an individual’s repayment plan if paying the minimum payment (2-3% of balance) and a 10% minimum balance due each month.

Balance$1000$2000$3000$4000$5000
Interest RateYears to pay off if only paying a 2% minimum monthly payment1
10%10.415.318.320.321.8
11%11.016.319.421.623.3
12%11.717.420.823.225.0
13%12.418.722.324.926.9
14%13.320.224.327.129.3
15%14.322.026.529.732.2
16%15.624.329.332.935.7
17%17.327.132.937.040.2
18%19.330.937.642.446.1
19%22.336.144.2**
20%26.443.7***
21%33.2****
22%46.1****
23%*****
24%*****
25%*****
26%*****
27%*****
28%*****
Balance$1000$2000$3000$4000$5000
Interest RateYears to pay off if only paying a 10% minimum monthly payment1
10% 3.0 3.6 3.9 4.2 4.3
11%3.03.6 3.9 4.2 4.4
12%3.03.64.04.3 4.4
13%3.0 3.74.04.3 4.5
14% 3.1 3.74.04.3 4.5
15%3.13.7 4.14.3 4.5
16%3.1 3.8 4.14.3 4.6
17%3.13.8 4.2 4.4 4.6
18% 3.2 3.84.2 4.4 4.7
19%3.23.84.2 4.5 4.7
20%3.23.8 4.3 4.5 4.8
21% 3.3 3.9 4.3 4.6 4.8
22%3.33.9 4.3 4.6 4.8
23%3.33.9 4.3 4.7 4.8
24%3.3 4.0 4.4 4.7 4.9
25%3.34.0 4.4 4.8 4.9
26%3.3 4.1 4.5 4.8 5.0
27% 3.4 4.1 4.5 4.8 5.1
28% 3.4 4.2 4.6 4.8 5.1

1 $10 minimum payment in effect if 2% of balance drops below $10. A $1 minimum finance charge in effect if finance charge calculates below $1.

* Not in this lifetime! At these rates, payment exceeds 50 years and in many cases, interest eventually becomes greater than the minimum payment.

Found from: http://www.aie.org/managing-your-money/credit-cards/credit-card-repayment-table.cfm

Potential Consequences of Debit Card Over Drafting

n overdraft occurs when the amount of a debit card transaction is larger than the available balance in the debit card account. When an overdraft occurs, the following possible consequences may result:

  • A charge for each overdraft that may be in excess of $25.
  • Other additional fees.
  • Increased interest rates.

Definitions of Credit Related Terms

The following terms are commonly used when discussing credit

Fixed Rate - a type of loan where the interest rate on the note remains the same through the term of the loan. Most credit cards do not offer fixed rates.

Variable Rate - a type of loan where the interest rate on the note fluctuates through the term of the loan.

Introductory Rate - Can often be an attractive option, but they last only for a limited time. When the teaser rate expires, the interest rate charged on your balance can jump dramatically.

Balance Transfers - are the transfer of a balance (either money or credit) in an account to another account, often held at another institution.

Grace Period - is a time past the deadline for an obligation during which a late penalty that would have been imposed is waived.

Annual Fee - is a charge paid once a year for the right to use a credit card.

Opt-Out - Informing a company that you don't want them to use your information for certain purposes or that they may sell it to others. This is for individuals that do not want their personal information shared with other companies or who do not want to receive telemarketing calls or direct mail. Sometimes businesses allow you to opt-out of having them use your information to send you solicitations, such as credit card offers.

The Federal Government’s Opt Out Program

The Federal Trade Commissions offers two methods for individuals who do not wish to receive prescreened offers of credit and insurance.

To opt out for five years: Call toll-free 1-888-5-OPT-OUT (1-888-567-8688) or visit www.optoutprescreen.com. The phone number and website are operated by the major consumer reporting companies.

To opt out permanently: You may begin the permanent Opt-Out process online at www.optoutprescreen.com. To complete your request, you must return the signed Permanent Opt-Out Election form, which will be provided after you initiate your online request.

Individuals may also send a written request to permanently opt out to each of the major consumer reporting companies. Make sure your request includes your home telephone number, name, Social Security number, and date of birth.

Experian
Opt Out
P.O. Box 919
Allen, TX 75013

TransUnion
Name Removal Option
P.O. Box 505
Woodlyn, PA 19094

Equifax, Inc.
Options
P.O. Box 740123
Atlanta, GA 30374

Innovis Consumer Assistance
P.O. Box 495
Pittsburgh, PA 15230

Do Not Call Registry – Unsolicited Phone Calls

The federal government's National Do Not Call Registry is a free, easy way to reduce the telemarketing calls you get at home. To register your phone number or to get information about the registry, visit www.donotcall.gov, or call 1-888-382-1222 from the phone number you want to register. You will get fewer telemarketing calls within 31 days of registering your number. Telephone numbers on the registry will only be removed when they are disconnected and reassigned, or when you choose to remove a number from the registry.

Unsolicited Mail Opt Out Process

The Direct Marketing Association's (DMA) Mail Preference Service (MPS) lets you opt out of receiving unsolicited commercial mail from many national companies for five years. When you register with this service, your name will be put on a "delete" file and made available to direct-mail marketers and organizations. This will reduce most of your unsolicited mail. However, your registration will not stop mailings from organizations that do not use the DMA's Mail Preference Service. To register with DMA's Mail Preference Service, go to www.dmachoice.org, or mail your request with a $1 processing fee to:

DMAchoice
Direct Marketing Association
P.O. Box 643
Carmel, NY 10512

Unsolicited Email Opt Out Process

The Direct Marketing Association also has an Email Preference Service (eMPS) to help you reduce unsolicited commercial emails. To opt out of receiving unsolicited commercial email from DMA members, visit www.dmachoice.org. Registration is free and good for six years.

Literacy in Financial Education Center

The mission of the Center is to change student knowledge and behaviors related to money management by providing financial education through various tools and resources.

The goal of the Center is to encourage students to practice responsible financial behaviors and graduate with a lower debt level by developing strategies to reduce their discretionary spending.

To access services related to financial education, please visit: http://castle.eiu.edu/life/