1. Credit statistics Average college student has 4.25 credit cards College seniors graduated with an average credit card debt of more than $4,100. Close to one-fifth of seniors carried balances greater than $7,000. Americans spend more than $1 trillion in credit every year In the last 12 months, 15 percent of American adults, or nearly 34 million people, have been late making a credit card payment 8 percent (18 million people) have missed a payment entirely. One in 6 families with credit cards pays only the minimum due every month. Only 45% of teens know how to use a credit card, Just 26% understand credit card interest and fees. Image source: http://www.kokogiak.com/megapenny/thirteen.asp Lesson 1

2. Credit  Credit- When a financial institution lends an individual money and trusts he or she will pay it back  Used to purchase items now and pay for them later Lender Person or organization with the resources to provide a loan Borrower Receives money from the lender; pays it back with interest or fees Lesson 1

3. Credit Credit is a source of revenue for financial institutions Credit is not more money: it is tomorrow’s money

4. Why Do You Need Credit Usually, you do not have the necessary amount of money in cash or in a bank account to pay for something, so credit helps you with the following…

5. 5C’s: Qualifying for credit In order to get credit, you need to QUALIFY for it 1. Character  Are you honest? Will you repay? 2. Capital  How much money are you worth? 3. Capacity  Can you repay? Do you have a job? 4. Collateral  What can the lender take away from you if you don’t pay? 5. Conditions  What is the health of the economy? Lesson 1

6. 2.4.1.G1 © Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 6 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Take Charge of Credit Cards Lesson 2

7. 2.4.1.G1 © Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 7 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona What is a Credit Card? Pre-approved credit – A financial institution determines that they can lend you X dollars, and they believe you will be able to pay it back. – Banks give them out! – http://www.dailymarkets.com/best-credit-cards-2014/ http://www.dailymarkets.com/best-credit-cards-2014/ Lesson 2

8. 2.4.1.G1 © Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 8 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Credit Card Terms Credit card: pre – approved credit. Interest- Fee for borrowed money Credit Line/Limit – Highest amount of money that can be charged to a credit card Annual Percentage Rate (APR)- Interest rate charged to the cardholder on the amount borrowed Finance Charge – Possible charges assessed to an account for credit card use Lesson 2

9. 2.4.1.G1 © Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 9 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Credit Card Terms Continued Annual Fees - Fee charged once per year for credit card ownership Minimum Payment – Smallest payment that can be made on a credit card bill Due Date – Date payment is due Late Payment Fee - Fee charged when a cardholder does not make the minimum monthly payment by the due date Lesson 2

10. 2.4.1.G1 © Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Advantages – Convenient – Useful for emergencies – Often required to hold a reservation – Purchase expensive items earlier – Eliminate the need to carry around large amounts of cash Brainstorm 3 advantages of using a credit card Lesson 2

11. 2.4.1.G1 © Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Disadvantages – Paying interest – Additional fees are common – Tempting to overspend – Responsible for lost/stolen cards – Identity theft is easier – Can cause large amounts of debt Brainstorm 3 disadvantages of using a credit card Lesson 2

12. © Family Economics & Financial Education –Updated April 2009– Credit Unit – Understanding a Credit Card Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Interest The price of borrowing money to make a purchase and paying it later Interest is referred to as the annual percentage rate (APR) Interest rate is charged per dollar borrowed per year Credit is often compounding interest which is interest added upon interest each month based upon the amount charged The interest rate varies greatly between credit cards Lesson 3

13. © Family Economics & Financial Education –Updated April 2009– Credit Unit – Understanding a Credit Card Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona APR Type of cardAverage APR* National average14.17% Cards with a low APR12.04% Cards designed for students13.87% Cards with airline or hotel rewards14.43% Cards for people with bad credit19.50% * Source: 5/19/10 CreditCards.com Weekly Credit Card Rate ReportCreditCards.com Weekly Credit Card Rate Report Lesson 3

14. 2.4.1.G1 © Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 14 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Safety Tips 1.Shred any unwanted credit card offers or credit cards received in the mail 2.Always check your credit card statement to make sure there are no false purchases 3.Sign card with signature and “Please See ID” 4.Do not leave cards lying around 5.Close unused accounts in writing and by phone, then cut up the card Lesson 2

15. 2.4.1.G1 © Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 15 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Safety Tips continued 6.Do not give out account number unless making secure purchases 7.Keep a list of all cards, their account numbers, and phone numbers separate from cards 8.Report lost or stolen cards promptly Lesson 2

16. 2.4.1.G1 © Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 16 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Remember…. Only use a credit card when there is no doubt about ability to pay off the charges at the end of the month Lesson 2

17. 2.4.1.G1 © Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 17 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona What is a Debit Card? Plastic card that looks like a credit card Electronically connected to your bank account Money is automatically taken from your bank account when purchases are made Requires a PIN (personal identification number) – Confirms the user is authorized to access the account Lesson 2