Credit Financial Literacy Mr. Missal and Ms. Raymond

C.14.c Analyze economic trends, income distribution, labor participation (i.e., employment, the composition of the work force), and government and consumer debt and their impact on society C.16.b Predict the impact of technology on the global workforce and on entrepreneurship Essential Questions: Why do people borrow money? When is it acceptable and unacceptable to use credit? How does borrowing impact spending power? Enduring Understanding: Every financial decision has a benefit, cost, and future consequence. Establishing good credit is crucial to becoming financially independent. Your credit past will affect your ability to borrow money in the future.

What is credit? money that a bank or business will allow a person to use and then pay back in the future a record of how well you have paid your bills in the past an amount of money that is added to an account Merriam-Webster Dictionary

Key Words Annual Fee — A yearly charge similar to a membership fee, usually ranges between $0 and $50. Annual Percentage Rate — The APR is the cost of credit expressed as an (APR) yearly rate. Finance Charge — The dollar amount paid to use credit, includes interest and all charges associated with the transaction. Grace Period — The grace period is the number of days you have before a credit card company starts charging interest on new purchases. Not all credit cards have a grace period. Periodic Rate — The interest rate the card issuer applies to your outstanding account balance to figure the finance charge for each billing cycle. Transaction Fees — Some credit card issuers charge a fee for a cash advance, a late payment or exceeding your credit limit. There may be a monthly fee if you do not use your card.

Why do people use credit cards? When is it OK to borrow money? When is borrowing money not a good idea?

Using Credit Credit Buy something now; pay for it later How we use credit is what’s good or bad Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it. ~ Nobel Prize-winning physicist Albert Einstein

Credit in the Community Consumers spend more money Demand for products and services rises Companies spend more and hire more employees Employees earn more money

Are these good reasons to borrow money? Taking out a $5,000 student loan for college tuition Charging dinner and movie tickets during a night out with your friends Buying a laptop that’s on sale using the store’s financing program Getting a loan to pay your credit card bills Charging repairs to get your car running again Borrowing cash from a friend to buy some magazines

Borrowing also can be a lifesaver in an emergency – you can’t just tell a rupturing appendix to wait until payday. By accepting a credit card payment, the hospital essentially lets you take a loan from the credit card issuer to pay for the emergency appendix surgery.

Reap the Rewards There are many reasons why people borrow money instead of paying cash, such as: Convenience Instant gratification Protection Emergencies Spreading out payments for expensive items Investments Credit history Special offers and perks

INHERENT DANGER IN CREDIT CARD USE AND ABUSE FRONTLINE PBS VIDEO "CREDIT CARD SECRETS"