2. Dealing the Cards of Credit

3. Credit cards No set time to be paid back May pay in full, part, or minimum payment No finance charge if bill paid in full

4. Advantages of Using Credit Cards Establish credit history Use of item now Safety Convenience Emergency funds Spending record Consumer protection

5. Disadvantages of Using Credit Cards Tend to overspend Credit history damaged if misused Card fees (annual, late) Interest (APR) Can be lost or stolen Risk of fraud

6. Pre-paid Credit Cards Deposit money into your credit card account Use anywhere your credit card company is accepted Once the money is spent, need to add more

7. Shopping for Credit Card Compare: APR Balance calculation methods Back dated interest charges

8. More Shopping Compare: Credit limit Card acceptability Services and features

9. Fees Annual Late payment Over credit limit Cash advance transaction

10. Cash Advance Facts Know the Cost of Cash Advances Interest begins immediately Service fee applies Purchase APR vs. cash advance APR

11. Grace Period Time period before interest is charged Typically 10 to 25 days Not offered if unpaid balance on card Not offered on cash advances

12. Maximum Debt Load Credit Payments = no more than 15-20% of take-home pay (includes credit cards, auto loans, student loans, etc.)

13. Rule of Thumb Total Debt 10% of Net Income # of years to pay off debt Should Equal No More Than 2 or 3 years to Pay Off Debt =

14. Smart Use of Credit Cards Develop system for paying Save receipts Pay card in full Avoid “no minimum payment due” Avoid “endless” repayment periods

15. Loan Amount - $1,000 Interest Rate19.8% Monthly Payment3% of balance not less than $15 # Years to Pay8.3 Total Finance Charge $843

16. Loan Amount - $1,000 Loan ALoan BLoan C Interest Rate8.5%14%19.8% Int. Paid 1 st Yr.$75.06$126.72$183.95 Yrs. to Pay Off5.75 yrs.6.7 yrs.8.3 yrs.

17. To Reduce Fraud Never lend your credit card Never leave receipts lying around Shred old receipts and bills Shred unwanted credit card offers Do not sign a blank receipt

18. And… Keep sight of your card Know how to correct errors Be careful over the phone Report lost or stolen card immediately Use credit card on secure Internet sites only

19. Credit Trouble Warning Signs Only able to make minimum payment Credit needed for daily expenses Borrowing to pay for existing debts Can’t pay bills on time

20. More Signs Spending up to credit limit Calls from creditors No savings Don’t know how much you owe Stressed about bills

21. Misuse of credit cards can… Damage credit history Damage chances of getting future credit Make it difficult to find a place to live or get a job Result in bankruptcy Cause stress