Who cares….is there really that much to know about them??? Credit Cards Who cares….is there really that much to know about them??? How many credit holders are there in the US? 181 million What percentage of adults is that? 77% What is the age at which the average consumer obtains their first credit card? 20.8 years What is the percentage of college student who have credit cards? 84% How many times does the average card holder use their card per year? 119 times What was the average amount per purchase? $88 How much is that annual total? $10,500 in purchases What percentage of credit card holders said they didn’t know the interest rate on the card they use most often? 21%

First things first….what is a credit card? All of those statistics indicate that you will be using a credit card of your own sometime soon….so let’s make sure you know how to use it First things first….what is a credit card? A credit card is tool that allows you to obtain a short term loan from a private company In other words, you are borrowing money to buy an item that you want or need …which is great because you can get what you want or need. What’s not so great is that you may have to pay INTEREST on each amount you borrow from the credit card company

In January, the average APR on a credit card was 15.22% In a 2009 study, 51% of Americans said that in the past 12 months they had carried over a balance and were charged interest on a credit card In January, the average APR on a credit card was 15.22% What does that mean? Well, if you charged $1000 balance on your account and paid the full balance over the course of the year (12 months), you’d pay $85 in interest A balance that is not paid in full by the end of the bill cycle is called a REVOLVING BALANCE The Revolving Balance is charged an ANNUAL PERCENTAGE RATE to calculate the interest owed to the credit card company

Do we really NEED credit cards? There are plenty of people who prefer to not have credit cards…but there reasons to have at least one Do we really NEED credit cards? Emergencies: most people get paid twice per month. Sometimes they need to pay for something but won’t have that amount of cash in their bank account until the next paycheck A credit card allows a person to make the emergency payment Need an example? The average car repair costs between $200 and $800 depending on the work being done Build Your Credit History: If you want to borrow money from a bank to make a major purchase like a car or a home, you have to have a strong credit history Using a credit card wisely will help you earn a high credit score The better your credit score, the easier it is to get a loan at lower rates

All you need to do is to learn how to use a credit card wisely. Luckily for you, there were some major law changes in 2009 and 2010 that help the consumer The most important protection for you is through the Truth in Lending Act This law requires the credit card company (or any creditor) to disclose (or tell) you of all the terms and conditions of your credit card or loan This document is called the Disclosure Statement The Credit Card Act of 2009 made these disclosure statements even easier to understand and also limited the fees and rates that credit card companies can charge

This is a pre-Credit Card Act of 2009 disclosure statement Have you ever heard the term “read the fine print”? Here’s the current version…

APR for purchases means the rate you’ll pay for items you buy with the credit card A Balance Transfer is when you use 1 credit card to pay for another. This is transferring the balance and you do it to take advantage of a lower rate A Cash Advance means that you are borrowing cash from the credit card company, not buying an item you’ll use A Penalty Rate is a higher APR that is charged to an account when there are 1 or more late payments. This rate can be temporary or permanent, depending on the terms in the disclosure statement This section used to be called a “grace period”, and is the amount of time you have to pay your balance in full without being charged interest Fees are extra money that you may be charged depending on the situation. These fees can be a penalty for a late payment, or just a cost to do a transaction

Another change is on your bill… Another change is on your bill….it must show you how long it will take you to pay your balance if you only make the minimum payment AND how much you’ll pay in interest

As you can see from the interest collected, credit cards are a very lucrative business. In 2011, the earnings for the Credit Card Industry were 18.5 billion dollars There are hundreds of different credit cards offered by dozens of companies. In order to attract customers, many cards offer special deals Introductory Rates: for a set number of months, all purchases will be charged at an APR that is lower than the regular rate. In some cases, the APR might be 0% Balance Transfers: to get customers who already have a balance with another credit card, this deal allows the customer to transfer a balance and pay a lower rate on the balance for a set amount of time Rewards Cards: these cards give bonuses as the customer uses them more. Some cards offer points that can be exchanged for credits at certain stores, some offer you free airplane flights and travel expenses, while others offer a percentage of your purchases back as cash Late Payment Forgiveness: if you make a late payment, you are not charged late fees or have your APR increased to the penalty rate

How do you choose a credit card? You should choose a card with features that will work with your use of the card Do you need to make a large purchase that you will pay off over several months? You need a card with a low introductory rate Will you carry a revolving balance for several months? You need a card with low APR Are you trying to improve your credit? You might have to take a basic card or even one with many fees Do you have a large revolving balance that you are trying to pay off? Consider a card with a low Balance Transfer rate Do you use your card for purchases, but pay off your balance every month? You might want a Rewards card

Fair Credit Billing Act What if your statement is wrong? You are protected against that too through the Fair Credit Billing Act You cannot be charged for: Something you didn’t buy A purchase by someone not authorized to use your card An amount on your bill that is different from the actual amount you paid A charge for something that you did not accept on delivery A charge for something that was not delivered according to agreement Arithmetic errors Payments not credited to your account You have 60 days to contact your credit card company and tell them of the billing error

The Truth in Lending Act protects you here… What if your card is stolen? The Truth in Lending Act protects you here… You are only responsible for $50 of the amount fraudulently charged to your account

Cashiers always ask “Debit or Credit?” What’s the difference? Remember that we said a credit card allows you to borrow money that you may not have? A debit card ONLY uses money that you have in your checking or savings account If you choose “credit”, the funds still come out of your checking or savings account The difference is in how the transaction is processed. Some banks charge fees for debit transactions You must use a Personalized Identification Number or PIN to access the funds from your account if you choose a debit transaction

What if my debit card is lost or stolen? Is there a law to protect me? What are the advantages of using a debit card? It’s quicker than writing a check It’s more convenient than carrying cash It’s not going to cause you to pay any interest You can get cash back after a purchase at many stores What if my debit card is lost or stolen? Is there a law to protect me? Yep, there is….The Electronic Funds Transfer Act If you report your card missing or stolen within 2 days, you are only responsible for $50 worth of charges If you report it between 2 and 60 days, you could be responsible for up to $500 worth of charges If you wait more than 60 days, you could be responsible for the entire amount You should frequently check your debit card transactions to be sure that all charges are made by you Debit card hackers often charge small amounts at first to see if you notice before making a bigger purchase

Using a credit card or a debit card will probably be your first steps towards financial independence Hopefully you’ll be informed enough to make wise decisions with your money