1. Credit Cards
What You Need To
KNOW

2. Credit cards
Any card that may be used repeatedly to borrow money or buy products and services on credit. Issued by banks, savings and loans, retail stores, and other businesses.

3. Wise credit Not managing your credit wisely can lead to:
Increased annual percentage rates (APRs)
Unnecessary fees
A decline in your credit
Denials of future credit

4. What are credit cards good for?
Emergencies
Big ticket items
Establishing credit
Safer than cash
More purchasing power
Protection from fraud on the Internet

5. Types of Cards

6. Credit cards Revolving Credit
Credit line can be used up to the credit limit
Pay charges in full each month, pay just the minimum, or make a partial payment greater than the minimum due
Available credit goes up and down as purchases and payments are made

7. Charge cards Pay all charges in full every month by the due date
Cannot carry a balance
No balance = no interest
Some charge cards allow a balance carry-over for specific purchases, such as travel charges

8. Secured credit cards Guaranteed by money deposited in an account
Credit limit usually equals the amount of the deposit
Can be used by people with credit problems to reestablish good credit

9. Sub-prime credit cards
Marketed to people who have poor credit
Typically have very low lines of credit, large upfront fees and high interest rates

10. Prepaid cards Also called stored value cards These are used by
retailers as gift cards
travelers as a safe way to get funds on the road
parents who want to give their kids the convenience of a credit card without the risk

11. Compare basic terms Look for a box with: This box is: interest rates
grace period
annual fee
This box is:
required by law
often headed with the words “Rates and Fees” or “summary of terms”

12. Default or penalty rates
Higher interest rates charged for late payments or decline in credit
Default factors
Late payment
Bounced check
You default on another account you have with the same creditor
Higher rate will apply to new transactions only, unless you are more than 60 days late

13. Minimum monthly payment
The lowest amount you are required to pay each month
Paying just the minimum amount does very little to reduce the amount owed
Paying more than the minimum helps reduce the amount of interest owed on the card
Excess payment must be applied to higher-rate balances first

14. Payment due date
The last day that payment can be accepted without penalty, generally days after the close of the billing cycle
Due dates must fall on the same day every month
If payment is not received by 5:00 on the due date, a late fee will be charged

15. ID theft monitoring services
Credit monitoring companies charge a yearly fee to check your credit report
Alerts you if information in your report changes, such as reviews by potential creditors or new accounts
You can check your credit report yourself for free

16. An educational partnership between Consumer Action and American Express