Take Charge of Credit Cards ==

Character: The quality of ones reputation or name; financial or economic trustworthiness. Capacity: Ability to fulfill obligations evidenced by diligence at work and prospects of continuing employment or income. Capital: Assets in the form of cash and securities available to spend and invest. Collateral: Security for a loan in case the borrower cannot pay back the amount borrowed. Conditions: Describe the intended purpose of the loan.

1.6.1.G1

1.6.1.G1

What is Interest? Interest is the price of money 1.6.1.G1 What is Interest? Interest is the price of money When referring to credit, interest is the charge for borrowing money The average balance per open credit card is $1,157 Interest can cause stress

Credit Limit- maximum amount of money that can be charged on the card What is a Credit Card? Plastic card that holds pre-approved credit Purchase items now Pay later Credit Limit- maximum amount of money that can be charged on the card

34% of Americans reported paying only the minimum credit card payment

What do you think is the best payment option? 1.6.1.G1 Credit Card Payments Make smaller payments- equal or unequal Pay total amount owed OR Minimum Payment- minimum amount of a credit card bill that must be paid every month What do you think is the best payment option?

1.6.1.G1

Why would someone choose a card with an APR of 10% instead of 15%? Credit Card Interest 10% APR 15% APR Why would someone choose a card with an APR of 10% instead of 15%?

Debit vs. Credit Card Credit Card Debit Card 1.6.1.G1 Debit vs. Credit Card Credit Card Debit Card Connected to an account that holds cardholder’s money Money is immediately taken out of an account Not connected to an account Money is borrowed and paid back later Debit Card - plastic card that is electronically connected to an account that holds cardholder’s money

How do you get a credit card? 1. 2. Examine credit card offers Complete an application

Show proof of sufficient income 1.6.1.G1 Getting a Credit Card Must be 21 UNLESS Show proof of sufficient income Have a co-signer If someone agrees to be a co-signer on an account, they are equally responsible for the loan

Grace Period Provision in most loan contracts which allows payment to be received for a certain period of time after the actual due date with no extra fees.

Finance Charge Another word for interest: A fee charged when the amount charged is not paid in full by the due date.

Advantages Disadvantages Convenient Useful for emergencies Often required to hold a reservation Purchase expensive items earlier Possibility of receiving bonuses, such as frequent flyer miles and cash rebates Paying interest if balance is kept on card Additional fees may apply if card is not used properly Tempting to overspend Responsible for lost/stolen cards Risk of identity theft

Do Don’t Pay amount charged in full every month Make late payments Pay payments on time Keep track of charges by keeping receipts Check monthly credit card statement for errors Make late payments Pay only the minimum payment due Go over the credit limit Charge items that can’t be paid off within the month

Irresponsible use of Credit Cards 1.6.1.G1 Irresponsible use of Credit Cards Late Payment Fee Over-the-Limit Fee Penalty APR Charged when minimum payment is not made by due date Charged if the amount of transactions goes over credit limit Higher interest rate charged on new transactions

Why is it important to examine a credit card statement? 1.6.1.G1 Purpose Includes Summarizes important information from previous month Transactions made Amount owed Minimum payment Payment due date (date minimum payment is due) Why is it important to examine a credit card statement?

Summary What is a credit card? 1.6.1.G1 Summary What is a credit card? How can you avoid paying interest on a credit card? What is the difference between a credit card and a debit card? Plastic card that holds pre-approved credit Used for the purchase of items now and payment of them later Pay the credit card balance in full every month! Debit card- money is taken from the cardholder’s account Credit card- money is borrowed and paid back later

Credit Reports and Scores

3 Major Credit Bureaus Credit reporting agencies collect and maintain the information that forms your credit history and ultimately, your credit report. That includes information about your existing credit accounts as well your payment history.

What’s on a Credit Report: Credit Reports Each person is legally given the right to a free annual credit report from AnnualCreditReport.com each year from each of the major credit bureaus (3 free reports per year) What’s on a Credit Report: Derogatory Remarks Late Fees Missed Payments Collection Notices Bounced Checks Credit Score

Credit Score A credit score is a three digit number calculated used by lenders to determine your worthiness for a mortgage, loan or credit card. Your score can affect whether or not you are approved as well as what interest rate you are charged.