PERSONAL FINANCIAL PLANNING

LOVELY PROFESSIONALUNIVERSITY
ASSIGNMENT-3

PERSONAL FINANCIAL PLANNING

Submitted to:
Mr. Lovey aggarwal

Submitted by:
Name: Harsukhsimran Roll No. : B 59 Reg. No.: 10900914 Section: RT1901

Most loans also have legal stipulations regarding the maximum amount of interest that can be charged.PERSONAL FINANCIAL PLANNING PART -A CREDIT A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some later date. The contractual amount of credit instruments represents the maximum undiscounted potential credit risk if the counterparty does not perform according to the terms of the contract. If a lender requires any collateral. The terms of a standardized loan are formally presented (usually in writing) to each party in the transaction before any money or property changes hands. These instruments help the lending firm to manage the credit risk associated with borrower. . Some credit instruments like credit derivatives are used for the risk mitigation purposes. Credit risk for other credit instruments using the same credit risk process that is applied to loans and other credit assets. When a consumer purchases something using a credit card. Any time when an individual finances something with a loan (such as an automobile or a house). The credit instruments are issued by the lenders only to those parties that are creditworthy. A large majority of these commitments expire without being drawn upon. and paying back the credit card company month by month). this will be stipulated in the loan documents as well. as well as other covenants such as the length of time before repayment is required. they are buying on credit (receiving the item at that time. before possible recoveries under recourse and collateral provisions.

and there is a set time that the loan will be paid off. and is only enough to get the borrower through until his or her next payday. is the same each month. Your payment. Here are some ways that you can borrow money. y Mortgages A mortgage is usually a large amount of money loaned by a bank or mortgage company in order to purchase a house or other property. and you cannot borrow additional amounts on the same loan. The interest rates are normally much higher than other kinds of loans. you are able to pay more than your monthly payment in order to pay the loan off more quickly. 20. y Payday Loans Payday loans are available to most people. In this type of loan. while adjustable rate mortgages fluctuate. if at all. when they must pay the loan back. . Many mortgages also include homeowners¶ insurance and taxes for the property that you are buying. depending on needs and credit history.PERSONAL FINANCIAL PLANNING VARIOUS CREDIT SOURCE There are many different types of credit sources that are available for people who want to finance purchases of all kinds. the monthly payment includes interest. Many people use personal loans to pay for cars. and these should only be used in the case of an emergency. Like a personal loan. or 30 years). With most personal loans. You get the money as a lump sum. the amount borrowed is usually fairly small. including interest. y Personal Loans Personal loans are loans given by a bank or financial institution in order to make a large purchase or to consolidate other debt. even those with bad credit. Fixed rate mortgages keep the same interest rate throughout the life of the loan (usually 15. Some mortgages are fixed for a certain amount of time and then change into an adjustable rate after that time period.

This much money should be able to handle any emergency that comes your way. In fact you can do everything with a debit card that you can with a credit card. You can build enough credit to qualify for a home loan by paying your rent on time for several years.PERSONAL FINANCIAL PLANNING You should choose the type of loan or credit that you apply for carefully. You may find it a little easier to do with a credit card. The utility companies and other businesses can send you to a collection agency if you do not pay on time. You should not be doing that anyway. Debit cards can be used anywhere a credit card can. This completely debunks the statement that you need one to rent a car. You destroy your credit when you do not pay your bills on time. y I Need a Credit Card for Emergencies If you plan well you should set up an emergency fund for emergencies. Your emergency fund should have at least $1000. and what interest rate is being offered to you. how much expendable money you have each month. and your emergency fund to cover those expenses. but you should try to have three to six months of expenses saved up. FINANCIAL NEED OF INDIVIDUAL y Need a Credit Card to Build Credit You build credit by paying your bills on time.00 in it. y I Need a Credit Card to Shop Online or Rent a Car Since debit cards have been introduced you no longer need a credit card to do these things. except spend money that you do not have. but you should be very careful as you try to do so. y I Need a Credit Card to Save Money on My Purchases . You do not need a credit card to build your credit history. taking in to consideration what you are purchasing. If you are stranded on the road and need to be towed you can use your debit card to pay for the tow. You can speak to a bank representative or credit counselor to find the right type of credit for your needs.

whatever one might need or want in a credit card may not be the same as what someone else needs. except that with credit cards payment can be delayed for a short time. They make more back on interest than they the discount they offer to you. then rewards they give out. credit cards allow the consumers to 'revolve' their balance. because the company realizes that most people are not going to pay off their credit cards in full each month. y I Need a Credit Card to Earn Rewards This is a dangerous game to play. This means that they make more money off the customers. Also keep in mind. they offer cards because they realize that while most people intend to pay the card off every month. You should make sure that you have a credit card with no annual fee. at the cost of having interest charged. The amount of the purchase becomes the cardholder¶s debt to the credit card issuer.PERSONAL FINANCIAL PLANNING Many stores will offer discounts for having a store credit card. A cardholder is provided with the ability to pay a merchant (goods and services providers) if cash is unavailable. Any unpaid balances will be subject to interest charges. A credit card is different from a charge card. where a charge card requires the balance to be paid in full each month. few actually do. PART-B CREDIT CARD Credit card users are billed on a monthly basis and are expected to pay at least the minimum payment. you may consider having a rewards credit card. Stores do not offer cards to give you discounts. A credit card is a payment card that involves a line of credit that is issued to the cardholder. Most credit cards are issued by local banks or . In contrast. Purchases with credit cards are just like purchases with cash. If you are responsible and pay off your balance in full each month. Additionally it is important to remember that the credit card offers its rewards.

60 × 53. Charge cards (American Express is one example) must be paid off each month. The difference lies in the way that payments are calculated.PERSONAL FINANCIAL PLANNING credit unions. and are the shape and size specified by the ISO/IEC 7810 standard as ID-1. Annual fee. You can make purchases with both whenever you desire. credit cards and charge cards are really two different things. This is defined as 85. . Grace period and other fees. We can charge whatever amount you want. and you need to be approved for both. Type of credit cards:y y y y y Premium Credit Cards Titanium Card Gold Credit Cards Commercial Cards Others Visa World Woman¶s Gold credit card Student credit card Travel credit card COMPARISION OF VARIOUS CREDIT CARDS (Related to APR.98 mm in size. but you do not have the option to only pay part of the bill.) Credit and Charge Cards Although many people use the terms inter changeably. you must pay the whole balance when the payment is due.

The questions below should help you figure out what type of credit card is best for situation. paying only the minimum amount due.PERSONAL FINANCIAL PLANNING With credit cards (MasterCard and Visa. for example).9% Cash Transactions: Interest free period: N/A 2.9% 0% for 12 months from date of account Opening 1. . If you do not qualify for a major credit card. Department store cards are similar to regular credit cards. in that you may choose to pay or not pay the entire balance each month.435% 18. and your current and future financial situation. you might have better luck applying for a department store credit card. Typical 18. but finding the best card is a fairly complicated process. Credit Card charges (Average) APR: Other interest Rates: Purchases: Balance Transfers: Introductory/Promotional rate Monthly rate Annual rate 0% for 3 months 1. You will be charged interest on the amount that you don¶t pay off each month. or paying an amount in between the minimum amount due and the entire balance. you have the option of either paying them off each month. Use our savings calculator on the compare page to find the credit card that is right for you. According to APACS (a UK payments association). It is also unlikely that any one card would be best for you in all scenarios.045% 27. so you should consider getting more than one credit card. These cards can normally only be used at the store that they are issued from.9% Maximum of 56 days for Purchases if you pay your balance in full and on time.how you intend to use it. There is no simple answer as it depends on.435% 18. Frequently people ask us which the best credit card is.4. in 2007 average number of cards per person was 2. but they tend to have higher interest rates.9% APR (variable) Right Credit Card for any individual With so many credit cards to choose from its crucial you think about how you intend to use the card.

depending on the size of your balance. Some cards also have a higher promotional rate for first 3-6 months. If you travel frequently/ shop frequently at certain retail stores you should consider reward credit cards from the travel providers/ retailers. Most cash back credit cards typically provide between 0. If you have good credit rating several credit cards with 0% balance transfer rates for 6 months to a year are available. There are some cards that waive this balance Transfer fee for a promotional period. y Do you currently pay for your purchases with cash/ don't use a credit card/ pay off your credit card balance in full each month? If you do then. Ideally you want to choose the card that provides a benefit value of 1% or higher of the spend otherwise a cash back card is a better option. so before deciding on which of these cards is best for you. It is important to make sure you pay off the monthly balance in full and in time.5%-3%. it might be ideal time to get a cash back credit card. Make sure to look at the balance transfer fees the average is around 2. y Do you anticipate making big purchases in the next couple of months and repaying the balance over the next 6 to 12 months? . Consider setting up a direct debit from your bank accounts to avoid late fees/ interest charges. the more you spend greater the percentage of cash back.PERSONAL FINANCIAL PLANNING Per APACS. there are over 1500 different credit cards available in the UK market. Most have different point schemes (1 point/mile per £1 to 10 points per £1 spend. cash back credit card/ rewards credit card maybe the best option for you.e. You will have to look at the promotional rate on balance transfers and duration of this promotion. you should answer the following questions as it will help you narrow down the list. y Do you have a large unpaid balance on your current credit cards? If you do then.5% cash back. So if you are planning on making some big purchases. For example if you expect to payoff the balance in a year you should look for balance transfer cards with low interest on balance transfers up to 12 or 15months. i. The value of these points differs so it is harder to do apples to apples comparison.5% to 1. a balance transfer Credit card may be the best option for you. This is usually based on tiered level of spending on the card.

With these cards you should be proactive and change the cards if you are unable to pay off the balances before end of the introductory interest rates. However with the different rates (introductory.6% to 10 %( not an introductory 0% rate) for the long term. typical Apr's). not guaranteed to stay the same. Most purchase credit cards have 0% rate on new purchases for 6-9 months and then the interest rate increases. finding the best card is a fairly complicated process. y Are you not sure about how much you would charge on the credit card and need flexibility in repaying the balance or don't want to worry about Changing cards frequently? If you answered yes then a Low APR credit card maybe the best option for you. Depending on how soon you expect to pay off the purchases you should get a card that gives you the longest duration for the 0% rate or the one with the lowest APR after the introductory period.PERSONAL FINANCIAL PLANNING If you do then. fees. balance transfer. a purchase credit card maybe the best option for you. Hopefully the above helps you figure out which type of credit card suits your Situation the best. so it means you don't have to look for a new card when you run into financial difficulties or every 9 to 12 Months.e. EXAMPLE:CITY BANK FEE AND CHARGE GOLD CLASSIC . Most of these rates are still variable i. but usually these rates don't change much. Typically these cards offer a low rate . We have built calculators that will to help you identify the right card. incentives etc.

Today HSBC provides a wide range of banking services for both corporate and individual customers. the Bank's unique relationship with the Middle East dates back more than a century. A principal member of the HSBC Group since 1959. the HSBC Group is represented by HSBC Bank Middle East Limited. the largest and most widely represented international Bank in the Middle East. it pioneered banking in the region and for decades was the only bank committed to supporting the area. Founded in London in 1889. Types of credit cards provide by HSBC Lassic Credit Cards Premier Credit Cards Gold Credit Cards Advance platinum Credit Card .PERSONAL FINANCIAL PLANNING Annual fee Basic card 2000 1000 500 Annual fee (Supplementary 750 card) Renewal fee Basic card Late payment penalty Grace period(1-2 months) 2000 300 1000 200 Hsbc Bank Middle East Limited In Bahrain.

Gold .69% (gold) Minimum Payments: 2.D.25% (depending on card. ± 50 B. (classic) 30 B.D.77% or 10 B.59% ± 2.D.D. (whichever higher) Annual Charges: 25 B.75 ± 2. (gold) CITY BANK Types of credit cards provided by city bank: y y Emirates-Citibank Credit Card Gold Credit Card Silver Credit Card y Features: y y y Interest: 2. 4 types offered) Minimum Payments: 5% or 10 B.D.PERSONAL FINANCIAL PLANNING Features: Interest: 1.D. (whichever higher) Annual Charges: 20 B.

PERSONAL FINANCIAL PLANNING USE OF CREDIT CARDS Always remember that every time you use your credit card. A lender may view to much available credit as a potential risky and your future ability to repay the available credit. some cards charge higher interest rates and there is no grace period for a cash advance. These cards carry extremely high interest rates and can be detrimental to your credit score. Avoid going over the limit because the added fees and interest can add up rapidly and it also hurts your credit score. Avoid cash advances. this is because you can save on interest charges and can help you to improve your credit score. Avoid charging more than 50% of your available credit. try not to carry more than that because too much available credit can and will hurt your credit score just as bad as having bad credit. you are taking a loan. Avoid department store or gas cards. . Always remember to pay your bill in full each month. Cash advances carry higher fees. The maximum amount of credit cards you can carry are only three. This keeps you from going over the limit as well as keeps your debt ratio low as well. These are actually the same as cash advances and the interest rates and fees inflicted can be outrageous. Avoid convenience checks. This is the smartest financial move you can make. Avoid carrying to many cards. Remember that all stores take Visa or MasterCard.

apnaloan.in/portal/newgen/seo/cards/credit-cards.wikipedia.com/Personal-Banking/cards/Consumer-Cards/CreditCard/personal-banking credit-cards.co.com/india-credit-cards/ .com/credit-card-india/ http://www.htm http://www.html http://www.in/1/2/personal/credit-cards http://www.icicibank.PERSONAL FINANCIAL PLANNING References GOOGLE.co.org/wiki/Credit_card http://www.citibank.hsbc.online.COM SCRIBD http://en.economywatch.

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