Take Charge of Credit © 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 Credit? Credit - is receiving fund either directly or indirectly to buy goods and services today with the promise to pay for them in the future Principal - The amount that was originally borrowed Interest - the amount that the borrower must pay for the use of someone else’s funds. © 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

Types of Loans / Credit Secured Loan Unsecured Loan Backed up with collateral. Can be the item being purchased (house, car, etc.) Guaranteed only by a promise to repay it. Not backed with Collateral. Interest rate is usually higher Examples: Credit cards, medical & utility bills

Types of Loans / Credit Revolving Installment Approved up to a certain credit limit Can use at any time Minimum payments must be made monthly Examples: credit cards Borrow a set amount Make equal payments Examples: car loan, mortgages, student loans

Group Activity Each group sort your envelop of information in to 2 categories: Advantages of Credit & Disadvantages of Credit Look on the back of the cards. Be ready to give an example of the one with a colored “dot” on it. © 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

Advantages Convenient Useful for emergencies Often required to hold a reservation Purchase expensive items earlier Eliminate the need to carry around large amounts of cash Protection against fraud Establish a positive credit history Online shopping is safer than a debit card b/c of the Fair Credit Billing Act protection Incentives, bonuses, frequent flyer miles © 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 Paying interest Additional fees are common Tempting to overspend Risk of Identity theft Can cause large amounts of debt Responsible for lost/stolen cards Applying for multiple accounts can lower your credit score If misused, can lower credit score © 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

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 word credit comes from the Latin word “Credo” meaning “I believe.” 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 © 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

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

Remember…. Only use a credit card when there is no doubt about ability to pay off the charges at the end of the month © 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

True/False Trivia 92% of college students have a credit card by their sophomore year? TRUE © 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

1 out of every 10 college students owes between $3,000 and $7,000 in credit card debt. FALSE Actually 1 in 5 college students owes between $3,000 and $7,000 in credit card 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

10% of teens 12-19 have their own credit card. TRUE © 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

Among Americans who have credit cards, the average number they own is two. FALSE The average number of credit cards American’s own is 3.6. © 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

The number of convenience users who "always pay-off in-full" has declined over the past three years from 42% to 37%. TRUE © 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

40% of [teenage] students are likely to buy a pair of jeans (or something similar) they really want even if they do not have the money to pay for it. TRUE © 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

Americans spent $15 billion in credit card fees in 2004, an 18% jump over the previous year. FALSE Americans actually paid more than $24 billion in credit card fees in 2004. © 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

Almost half (47%) of all college students carry four or more credit cards. TRUE (Source: http://www.fcs.iastate.edu/financial) © 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

If you lose your credit card you should wait until your next bill comes to see if any one has been using it. FALSE You should report a stolen credit card immediately. © 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