DO THIS NOW… Sit in assigned groups Take out homework Share key ideas with one another about credit card usage and credit scores Come up with a new list of 7 and 5 key ideas everyone can agree on Be prepared to share

How can we be responsible users of credit?

Discussion What do we need to remember to be responsible users of credit cards? And how do we build strong credit scores?

Credit Card Basics Using the bank’s money: Must pay back bank monthly: Set limit Set interest rate (APR) Must pay back bank monthly: Amount spent PLUS interest

Credit Card Interest Calculation Periodic Interest x Average Daily Balance Average daily balance: Sum of each day’s balance / days in billing period Periodic Interest: APR / 365 The lesson? LOWER APR leads to LOWER INTEREST

Calculating Minimum Payments Percentage Method: Predetermined percentage of balance Percentage + Interest + Fees: Exactly as it sounds

AVOIDING Minimum Payments Disadvantages of Paying the Minimum: Largely paying interest Not paying down principle Principal balance will begin to stack Credit balance will skyrocket Will negatively impact credit score The lesson? ALWAYS PAY MORE THAN THE MINIMUM

Fees of Credit Cards Annual Balance transfer Foreign transaction Late payment Over the limit

Benefits of Credit Cards Build credit Rewards perks

Credit Score Basics Definition: Purpose: Significance: Numerical expression of individual’s borrowing history Purpose: Determine if borrower is worthy of a loan/credit Significance: Determine if loans/credit received Determine terms of loan/credit

Payment History Late payments? Missed payments? 35% of score

Credit Utilization Line-item utilization Aggregate utilization Under 30% Aggregate utilization 30% of score

Age of Credit Benefit to score: Harmful to score: 15% of score Long open accounts Harmful to score: Newly opened accounts 15% of score

Types of Accounts Benefit to score: Harmful to score: 10% of score Different types Harmful to score: All the same 10% of score

History of Applying Benefit to score: Harmful to score: 10% of score Applying infrequently Harmful to score: Applying frequently 10% of score

Applying Learning: Credit Cards Pull out your phones and visit the following website https://wallethub.com/credit-cards/no-credit-student/ Click on the title of each credit card to explore its characteristics. After researching the different credit cards, use a half sheet of paper you can turn in to identify which credit card you would like to apply for in the future and explain your reasoning. You reasoning MUST cite ideas discussed in today’s reading and group discussions to justify your choice in credit card. You have 20 minutes

Applying Learning: Credit Counseling In your groups, you will be presented with a packet with two activities: One will ask you to counsel students on improving their credit scores based on a profile The other will ask you to determine the impact that credit scores have on the ability of individuals to take out loans Follow the directions of each section carefully You will need your phones for the activity – one per group please Raise your hands and let me know if your group needs help You have until 5 minutes before the end of class to work on the activities

How do credit scores impact an individual’s ability to get a loan? Discussion How do credit scores impact an individual’s ability to get a loan?

Remainder of Class Complete journal reflection entry on credit card usage and credit scores