1. Objective: Compare and contrast debit and credit
5.4 – Credit v. Debit
Objective: Compare and contrast debit and credit

2. II. Credit v. Debit
A. Credit: spending $ that you don’t have (borrowing)
1. Interest: Paying extra $ for borrowing

3. a. Annual Percentage Rate (APR): shows you how much your borrowing will cost you over a year.
(1). This can help you decide which credit card is best for you

4. B. Types of Credit
1. Credit Card: can borrow a certain amount of $ to spend
2. Student Loan
3. Car Loan
4. Mortgage (Home Loan)
a. Foreclosure: loosing your home because you do not pay your mortgage

5. Is Establishing Credit Necessary?
YES!!! In the 21st century you need to establish credit if you want to do the following things…
Buy a Home
Buy a Car
Receive a good interest rate on a loan
Having a good credit score shows lenders that you are reliable and will pay them back

6. C. Est. Good Credit
1. Credit Score: a number assigned to a person that lets lenders know your ability to pay back a loan

7. 2. To est. good credit you must start buying things using credit and pay that money back in a timely manner.
Helpful tips…
Have bills in your name
Always pay bills on time or earlier and try to pay more than the minimum payment
Keep a steady job
Don’t move often
Keep your debt low
Use your cards responsibly
Stick to a budget

8. 3. Credit Line: how much money is available for borrowing
4. Financing: borrowing money to pay for an item you will pay off over time
5. Debt: money that you owe someone (person/business/organization) else

9. Comparing Credit & Debit
Card Type
Pros
Cons
Debit Card
You don’t have to carry cash/checkbook
It’s safe b/c only you know your PIN
You are using the $ you actually have which can help with budgeting
You must have enough $ in your account to make purchases
You have to remember your PIN to access cash
If you don’t keep track of your purchases, you could overdraw and have to pay a fine

10. Credit Card Card Type Pros Cons
You can buy things before you have saved the entire purchase price
It is a way to pay for emergency expenses
Using it wisely and paying off on time can help you improve your credit score
You may have to pay a yearly fee for the card
You pay interest on the unpaid monthly balance. This means paying more for items than they really cost!