HACE 3200 1st Edition Lecture 11Outline of Last Lecture I. Income tax structureII. Social Security III. State and Income TaxesIV. Standard DeductionsOutline of Current Lecture V. Using Credit CardsVI. Open CreditVII. The Five Cs of CreditVIII. Balance Calculation MethodsCurrent Lecture- Taxes (cont’d)o Choosing a Tax Formo 1040EZ Taxable income less than $50,000 Cant itemize or claim dependents o 1040A Taxable income less than $50,000 Allows for more sources of incomeo 1040 “long form” Allows the use of schedules Only form that allows you to itemize deductions o How to file? Electronic filing Refund within 3 weeks- Less chance of processing error Filing by mailo Help in Preparing Your Taxes IRS hotline: 1.800.829.1040 Self-help tax publications Computer programs Tax specialistsThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.- Chapter 6: Using Credit Cards: The role of Open Credito Definitions and Examples of Credit Credit: receiving cash, goods, or services with an obligation to pay later Closed credit: credit that you must repay in fixed payments- Examples: car loans, mortgages Open credit: credit that you can use and repay at your pace so long as you pay the required minimum monthly payment- Examples: credit cards or department store credit cards- Factors that determine Credit worthinesso Annual incomeo Length of time at current residenceo Length of time at current jobo Number of bank accounts o Number of credit cardso Credit history- Getting a Credit Card: The Five Cs of Credito Charactero Capacityo Capitalo Collateralo Conditions- Character: Sense of responsibility toward debt paymento Proven debt repayment historyo Job stabilityo Home ownership/rental lengtho Low debt load- Capacity: Ability to repay debto Current level of income and source of incomeo Current level of borrowing (how many lines of credit do you currently have)o Level of non-obligated incomeo Debt including mortgage should be less tan 36% of your gross income (debt to income ratio)- Capital: Size of your financial holdingso Investment holdingso Savingso Checkingo Incomeo Assets- Collateral:o Assets or property secured to obtain credito The creditor holds the title or deed to the assets until repaido If you default the asset is sold to repay debto Typically secured assets include: automobiles, home, boats- Conditions: Extraneous factorso Impact the current economic environment may have on your ability to repay debt Unemployment rate Discount rate Inflation rate- My Own personal C: Cautiono Thef Protect the card itself and your card #o Identity thef Shoulder surfing Dumpster diving- Know Your Credit Card Philosophyo Credit user Low APRo Convenience user Low annual free Long, interest-free grace period Free benefitso Convenience and credit user Balance interest rate and annual fee for the lowest total costs- Costs Associated with credit cardso The balance owedo Interest/rate/finance chargeo Cash advance costso The annual feeo Additional or penalty fees- Balanced owed= Revolving Balanceo Revolving credit If you carry a balance from month to month on your credit card then you have a revolving account Compound interest is calculated on revolving balances- Interest Rates determines finance chargeo Annual percentage rate(APR)- interest rate paid over the life of the loano Teaser rates- introductory rates used to attract new customers, some as low as 0.0%o Most credit cards compound interest on a monthly basis( APR/12)- Balance Calculation Methodso Average daily balance, most common Including new purchases Excluding new purchaseso Previous balance- Balance on previous month’s billing not including paymentso Adjusted balance Balance on previous billing minus payments- Average Daily Balance( 18% APR)o $9595/ 31 = $309.52o $309.52 x .18/12o or (1.5%) MPR= $309.52 x .015=- $4.64 in finance
View Full Document
Unlocking...