Take Charge of Credit Cards © Family Economics & Financial Education – December 2005 – Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

What is a Credit Card? Pre-approved credit Credit- When a financial institution lends an individual money and trusts he or she will pay it back Used to purchase items now and pay for them later The creditor is saying in effect, he believes the borrower is willing and able to keep his promise to pay the money back plus interest. You are making a promise and an agreement, giving your word you will pay back the money. IT is NOT free money!!! © Family Economics & Financial Education – December 2005 – Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Credit Card Terms Interest- Fee for borrowed money Credit Line – Maximum amount of money that can be charged to a credit card Annual Percentage Rate- Interest rate charged to the cardholder on the amount borrowed Finance Charge – Possible charges assessed to an account for credit card use Grace Period – Amount of time allowed before finance charges are applied © Family Economics & Financial Education – December 2005 – Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Credit Card Terms Continued Annual Fees - Fee charged once per year for credit card ownership Minimum Payment – Minimum payment of a credit card bill that must be paid Due Date – Date payment is due Late Payment Fee - Fee charged when a cardholder does not make the minimum monthly payment by the due date © Family Economics & Financial Education – December 2005 – Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Fair Truth in Lending Act Schumer Box Fair Truth in Lending Act Information required by law to inform consumer of all costs associated with use of a credit card Annual Percentage Rate for Purchases   Grace Period for Purchases Minimum Finance Charges Balance Calculation Method for Purchases Annual Fees Transaction Fees for Cash Advances Late Payment Fees 19.9% Not less than 25 days $.50 when a finance charge at a periodic rate is charged Average daily balance method (including new purchases) $20 per year 2% with a minimum fee of $3 $29 © Family Economics & Financial Education – Revised October 2004 – Credit Unit – Selecting a Credit Card Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Advantages Brainstorm 3 advantages of using a credit card Convenient Useful for emergencies Often required to hold a reservation Purchase expensive items earlier Eliminate the need to carry around large amounts of cash © Family Economics & Financial Education – December 2005 – Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Disadvantages Brainstorm 3 disadvantages of using a credit card Paying interest Additional fees are common Tempting to overspend Responsible for lost/stolen cards Identity theft is easier Can cause large amounts of debt © Family Economics & Financial Education – December 2005 – Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Safety Tips Shred any unwanted credit card offers or credit cards received in the mail Always check your credit card statement to make sure there are no false purchases Sign card with signature and “Please See ID” Do not leave cards lying around Close unused accounts in writing and by phone, then cut up the card © Family Economics & Financial Education – December 2005 – Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Safety Tips continued Do not give out account number unless making secure purchases Keep a list of all cards, their account numbers, and phone numbers separate from cards Report lost or stolen cards promptly © Family Economics & Financial Education – December 2005 – Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Assignment Reading the Credit Card Statement (practicalmoneyskills.com activity 8-2a) Taking Credit By The Horns (FEFE worksheet 2.4.1.A1) © Family Economics & Financial Education – December 2005 – Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona