Financial Literacy Stater Credit Financial Literacy Stater

Define the following terms in your notes: Credit limit APR Annual fee Finance charge Minimum payment Grace period

Video clips Watch the three short clips in the following link: https://www.moneycoach.io/videos/credit-cards/1 Video #1: What is the difference between debit and credit? How can you avoid paying interest? What are some benefits of using credit cards? What is the difference between having a cosigner and being an authorized user?

Video clips Video #2 Video #3 What is a credit report? What is a credit score? The higher your credit score, the _________ your interest rate. What are the 4 major ways to improve your credit score? What are the two last things to keep in mind? Video #3 What are the 9 rules to follow when using credit?

The 3 C’s of Credit Character Capacity Capital Your general trustworthiness, credibility and personality. Judged from credentials, references, reputation and interaction with lenders. Capacity Your ability to repay the loan Steady employment or source of income Current living expenses and other financial obligations Capital Current status of savings and investments Available collateral

Card Safety Always Never Report lost or stolen cards immediately Check all statements against receipts Never Lend your card to anyone Keep your PIN or Passwords in your purse or wallet Leave your card or receipts lying around

How to Reduce Credit Card Debt 1. Find out how much you owe. Not static – will continue to grow due to interest/fees 2. Pay more than the minimum. Minimum payments are designed to keep you paying forever. 3. Send in your payment as soon as you get your bill. Beat the deadline for the grace period to avoid more interest. Build a prompt payment history. 4. When you pay off one card, put those payments on another. Keep installment debt payments at the same level, regardless of how many debts you’ve paid off. Your balances will shrink faster that way.

How to Reduce Credit Card Debt 5. Refuse your card issuer’s offer of a minimum payment of zero or skipping a payment. No late fee, but interest will still accrue. 6. Consolidate your cards. Transfer balances to the card with the lowest interest rate whenever you can. This means between existing accounts. Don’t open new accounts. 7. Refinance your high-rate credit card. If your payment history has been solid and your credit has improved, you may be able to refinance to a lower rate by contacting your lender. 8. Consider using your savings to pay off your high-rate credit card balances. Chances are a high interest rate is costing you far more than you would earn in interest from a typical savings account. That money may be better spent paying down debt than gathering smaller interest in a savings account.