1 Personal Finance 7.02: Understand ways to protect personal credit.

2 Activity Show the video clip “Amateur Rock Star” by Scott Blair from this link: http://www.whatsmyscore.org/contest/videos.php. http://www.whatsmyscore.org/contest/videos.php Discussion:  How can having a bad credit score negatively affect a person?  If bills are not paid, what items may be repossessed?  What is the impact when seeking credit in the future?  What is the overall message of this video clip? Main Idea: Individuals should check their credit report, know their scores, and not spend beyond their financial limits.

3 Activity Display Appendix 7.03A, “Use of Credit---Agree or Disagree.” Have students record in their notes whether they agree or disagree with each data statement about use of credit by college/university undergraduates.

4 Journal Entry What do you think Credit is?

5 Credit Overview

6 What Is Credit? Obtaining goods and services with a promise to pay for them from future income A temporary money substitute since it allows a person to buy today and pay tomorrow Can be a valuable resource when used wisely Credit involves two parties, a lender and a borrower  Lender (creditor, credit-provider, source of credit) One who provides money for purchases based on a person’s promise to repay Lender expects borrower to pay extra, known as interest, for the use of the money Borrower (debtor)---One who received credit from a lender

7 Types of Consumer Credit Sales Credit  Regular charge account  Installment account  Revolving credit account Cash Credit---Secured and Unsecured  Company or retail store credit cards  Travel and entertainment credit cards  General-purpose credit cards

8 Solve Credit Problems  Actively deal with the problem  Stop using credit; focus on repayment  See a credit counselor  Develop a spending plan with living expenses and a plan for repayment  Ask creditors to adjust credit terms

9 Establish Credit The importance of credit ratings Credit ratings are based on the three Cs  Character  Capacity  Capital Ways to establish credit  Open/manage checking/saving accounts  Pay utility bills in your name  Obtain a credit card from a local store  Get help from a cosigner  Obtain a secured credit card

10 Maintain Good Credit  Evaluate when you really need credit  Shop for the right type of credit for each purchase  Shop for the best credit terms  Know how you will pay back  Use only the amount of credit you can repay  Meet terms of credit agreements  Keep accurate records  Consult creditors immediately if you cannot pay on time  Resolve billing errors promptly

Credit Card Understanding Your Credit Card Credit Unit Take Charge of Your Finances

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 12 Credit When goods, services or money is received in exchange for a promise to pay a definite sum of money at a future date The price of money- when referring to credit, interest is the charge for borrowing money CREDIT- INTEREST-

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 13 Lender and Borrower LENDER- The person or organization who has the resources to provide the individual with a loan BORROWER- The person or organization that is receiving the money from the lender

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 14 Closed-end vs. Open-end Credit CharacteristicsClosed-end credit Open-end (revolving) credit DefinitionA one-time loan Credit extended in advance Purpose of loanSpecified in application May be used for a variety of purposes

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 15 Closed-end vs. Open-end Credit CharacteristicsClosed-end creditOpen-end credit Payments Specified number of equal payments Varies- can be paid in one payment or a series of equal or unequal payments Loan Amount Agreed upon during the application process May be increased for responsible consumers Examples Mortgage, automobile, education loans Credit cards

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 16 Credit Card What is a credit card? Pre-approved credit which can be used for the purchase of goods and services now and payment of them later A credit cards credit limit varies based upon an individual’s perceived creditworthiness Credit limit is the maximum dollar amount loaned Creditworthiness is an individuals ability and willingness to pay the money back

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 17 Credit Card Interest Interest is charged each month the balance is not paid in full The cost of credit expressed as a yearly interest rate Rate at which interest is charged is referred to as: Annual Percentage Rate (APR)

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 18 Minimum Payments Required to make at least a minimum payment each month – Usually only a small percentage (2.5-5%) of the total balance due Cardholders who only make the minimum payment: – Make slow progress paying off card balance – Pay substantially more than what was initially charged to the card

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 19 Minimum Payments Amount charged to credit card in one purchase APR Minimum payment Time to pay off the credit card Total amount paid in interest Total amount paid $2,00018%$50.0062 months$1,077.25$3,077.25 $50012%$25.0023 months$60.67$560.67

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 20 Advantages to using Credit Cards Advantages Convenient payment tool Useful for emergencies Often required to hold a reservation Able to purchase “big ticket” items and spread out payments Protection against fraud Opportunity to establish a positive credit history Online shopping is safer than using a debit card because of the Fair Credit Billing Act protection Possibility of receiving bonuses, such as frequent flyer miles or cash rebates

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 21 Disadvantages to using Credit Cards Disadvantages Interest can be costly when a balance is revolved Additional penalty fees may apply Tempting to overspend Risk of identity theft Responsible for lost/stolen cards Applying for multiple accounts can lower your credit score

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 22 Debit Cards What is a debit card? – A plastic card which looks like a credit card, but is electronically connected to the cardholder’s bank account – Money is immediately withdrawn from the cardholders checking account What is the difference between a credit card and a debit card?

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 23 Credit History Credit Report A record of a consumer’s credit history that includes information about credit card use as well as the use of other types of credit, such as auto loans, student loans and mortgage loans A number that summarizes an individual’s credit record and history. It is a numeric “grade” of a consumer’s financial reliability Credit Score Credit cards can have a positive or negative impact on an individuals credit history

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 24 Positive Credit Card use Proper credit card use Helps develop positive credit history and credit report Earn a high credit score A high credit score gives the consumer the opportunity to have lower interest rates on loans, the privilege to use different forms of credit, and an easier approval process for future credit

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 25 Positive Credit Card Use Examples of positive credit card behaviors: – Paying credit card balances in full every month – Paying credit card bills on time – Applying for only credit cards that are needed – Keeping track of all charges by keeping receipts and using a check register – Checking the monthly credit card statement for errors

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 26 Negative Credit Card Use Consumers with low credit scores have difficulty getting loans, difficulty renting apartments, pay higher interest rates, pay higher insurance rates, and have difficulty obtaining a job Improper credit card use Develops negative credit history and credit report Lower credit score

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 27 Negative Credit Card use Examples of negative credit card behaviors: – Making late credit card payments – Paying only the minimum payment – Exceeding the card’s credit limit (usually triggers a penalty fee) – Charging items that can’t be paid off immediately – Owning too many credit cards

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 28 NO Credit If an individual has not used credit, they will not have any information in their credit report Not having a credit report can cause an individual to be denied credit

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 29 Credit Card Offers Credit card issuers are required to disclose the terms and fees of credit cards in an easy to read box format This is called the Schumer box

Credit Card 30 Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases 12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate. APR for Balance Transfers 15.99%  This APR will vary with the market based on the Prime Rate APR for Cash Advances21.99%  This APR will vary with the market based on the Prime Rate Penalty APR and When it Applies 28.99% This APR may be applied to your account if you: 1.Make a late payment; 2.Go over your credit limit; 3.Make a payment that is returned; or 4.Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due. How to Avoid Paying Interest on Purchases Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month. Minimum Interest Charge If you are charged interest, the charge will be no less than $1.50. For Credit Card Tips from the Federal Reserve Board To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard Fees Set-up and Maintenance Fees NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209.  Annual Fee: $20  Account Set-up Fee: $20 (one-time fee)  Participation Fee: $12 annually ($1 per month)  Additional Card Fee: $5 annually (if applicable) Transaction Fees  Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)  Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater  Foreign Transaction: 2% of each transaction in U.S. dollars Penalty Fees  Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000  Over-the-limit: $29  Returned Payment: $35 * How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).” * Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill Annual Percentage Rate (APR) for Purchases This section discloses the interest paid for purchases on the card. Multiple interest rates may be listed here, because the final interest rate may depend on the creditworthiness of the applicant

31 Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases 12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate. APR for Balance Transfers 15.99%  This APR will vary with the market based on the Prime Rate APR for Cash Advances21.99%  This APR will vary with the market based on the Prime Rate Penalty APR and When it Applies 28.99% This APR may be applied to your account if you: 1.Make a late payment; 2.Go over your credit limit; 3.Make a payment that is returned; or 4.Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due. How to Avoid Paying Interest on Purchases Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month. Minimum Interest Charge If you are charged interest, the charge will be no less than $1.50. For Credit Card Tips from the Federal Reserve Board To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard Fees Set-up and Maintenance Fees NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209.  Annual Fee: $20  Account Set-up Fee: $20 (one-time fee)  Participation Fee: $12 annually ($1 per month)  Additional Card Fee: $5 annually (if applicable) Transaction Fees  Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)  Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater  Foreign Transaction: 2% of each transaction in U.S. dollars Penalty Fees  Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000  Over-the-limit: $29  Returned Payment: $35 * How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).” * Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill Introductory Rate If the credit card has an introductory rate it will be shown in this section, which is the APR charged during the credit card's introductory period after a credit card account is opened. The card will have a different APR after the introductory period ends What is the introductory rate for this credit card offer? The introductory rate depends on the creditworthiness of the applicant, but it will be 12.99%, 13.99%, or 14.99%

32 Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases 12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate. APR for Balance Transfers 15.99%  This APR will vary with the market based on the Prime Rate APR for Cash Advances21.99%  This APR will vary with the market based on the Prime Rate Penalty APR and When it Applies 28.99% This APR may be applied to your account if you: 1.Make a late payment; 2.Go over your credit limit; 3.Make a payment that is returned; or 4.Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due. How to Avoid Paying Interest on Purchases Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month. Minimum Interest Charge If you are charged interest, the charge will be no less than $1.50. For Credit Card Tips from the Federal Reserve Board To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard Fees Set-up and Maintenance Fees NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209.  Annual Fee: $20  Account Set-up Fee: $20 (one-time fee)  Participation Fee: $12 annually ($1 per month)  Additional Card Fee: $5 annually (if applicable) Transaction Fees  Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)  Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater  Foreign Transaction: 2% of each transaction in U.S. dollars Penalty Fees  Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000  Over-the-limit: $29  Returned Payment: $35 * How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).” * Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill Variable-rate APR Some cards will have a variable- rate APR, which is an APR that may change depending on other factors, such as the prime rate. The prime rate is an index that represents the interest rate most banks charge their most credit- worthy customers What is the APR for Purchases for this credit card offer? 14.99% Is this a variable-rate APR or a fixed-rate APR? Variable-rate APR

33 Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases 12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate. APR for Balance Transfers 15.99%  This APR will vary with the market based on the Prime Rate APR for Cash Advances21.99%  This APR will vary with the market based on the Prime Rate Penalty APR and When it Applies 28.99% This APR may be applied to your account if you: 1.Make a late payment; 2.Go over your credit limit; 3.Make a payment that is returned; or 4.Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due. How to Avoid Paying Interest on Purchases Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month. Minimum Interest Charge If you are charged interest, the charge will be no less than $1.50. For Credit Card Tips from the Federal Reserve Board To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard Fees Set-up and Maintenance Fees NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209.  Annual Fee: $20  Account Set-up Fee: $20 (one-time fee)  Participation Fee: $12 annually ($1 per month)  Additional Card Fee: $5 annually (if applicable) Transaction Fees  Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)  Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater  Foreign Transaction: 2% of each transaction in U.S. dollars Penalty Fees  Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000  Over-the-limit: $29  Returned Payment: $35 * How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).” * Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill APR for Balance Transfers This section discloses the interest paid for balance transfers, which is the act of transferring debt from one credit card account to another. Balance transfer fees may apply, even if the balance transfer APR is 0% What is the APR for balance transfers for this credit card offer? 15.99%

Credit Card 34 Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases 12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate. APR for Balance Transfers 15.99%  This APR will vary with the market based on the Prime Rate APR for Cash Advances21.99%  This APR will vary with the market based on the Prime Rate Penalty APR and When it Applies 28.99% This APR may be applied to your account if you: 1.Make a late payment; 2.Go over your credit limit; 3.Make a payment that is returned; or 4.Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due. How to Avoid Paying Interest on Purchases Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month. Minimum Interest Charge If you are charged interest, the charge will be no less than $1.50. For Credit Card Tips from the Federal Reserve Board To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard Fees Set-up and Maintenance Fees NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209.  Annual Fee: $20  Account Set-up Fee: $20 (one-time fee)  Participation Fee: $12 annually ($1 per month)  Additional Card Fee: $5 annually (if applicable) Transaction Fees  Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)  Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater  Foreign Transaction: 2% of each transaction in U.S. dollars Penalty Fees  Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000  Over-the-limit: $29  Returned Payment: $35 * How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).” * Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill APR for Cash Advances This section discloses the interest paid for cash advances, such as withdrawing cash from an ATM using a credit card. Cash advance fees may also apply What is the APR for cash advances for this credit card offer? 21.99%

35 Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases 12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate. APR for Balance Transfers 15.99%  This APR will vary with the market based on the Prime Rate APR for Cash Advances21.99%  This APR will vary with the market based on the Prime Rate Penalty APR and When it Applies 28.99% This APR may be applied to your account if you: 1.Make a late payment; 2.Go over your credit limit; 3.Make a payment that is returned; or 4.Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due. How to Avoid Paying Interest on Purchases Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month. Minimum Interest Charge If you are charged interest, the charge will be no less than $1.50. For Credit Card Tips from the Federal Reserve Board To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard Fees Set-up and Maintenance Fees NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209.  Annual Fee: $20  Account Set-up Fee: $20 (one-time fee)  Participation Fee: $12 annually ($1 per month)  Additional Card Fee: $5 annually (if applicable) Transaction Fees  Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)  Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater  Foreign Transaction: 2% of each transaction in U.S. dollars Penalty Fees  Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000  Over-the-limit: $29  Returned Payment: $35 * How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).” * Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill Penalty APR and When it Applies This section discloses the penalty APR, as well as the penalty terms that trigger the penalty APR to take effect Penalty APR is the interest rate charged on new transactions if the penalty terms in the credit card contract are triggered What is the Penalty APR for this credit card offer? 21.99%

Credit Card 36 Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases 12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate. APR for Balance Transfers 15.99%  This APR will vary with the market based on the Prime Rate APR for Cash Advances21.99%  This APR will vary with the market based on the Prime Rate Penalty APR and When it Applies 28.99% This APR may be applied to your account if you: 1.Make a late payment; 2.Go over your credit limit; 3.Make a payment that is returned; or 4.Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due. How to Avoid Paying Interest on Purchases Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month. Minimum Interest Charge If you are charged interest, the charge will be no less than $1.50. For Credit Card Tips from the Federal Reserve Board To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard Fees Set-up and Maintenance Fees NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209.  Annual Fee: $20  Account Set-up Fee: $20 (one-time fee)  Participation Fee: $12 annually ($1 per month)  Additional Card Fee: $5 annually (if applicable) Transaction Fees  Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)  Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater  Foreign Transaction: 2% of each transaction in U.S. dollars Penalty Fees  Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000  Over-the-limit: $29  Returned Payment: $35 * How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).” * Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill How To Avoid Paying Interest on Purchases This section explains how you can avoid interest charges on a credit card How can a cardholder avoid paying interest on a credit card? By paying credit card bills in full by the due date

Credit Card 37 Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases 12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate. APR for Balance Transfers 15.99%  This APR will vary with the market based on the Prime Rate APR for Cash Advances21.99%  This APR will vary with the market based on the Prime Rate Penalty APR and When it Applies 28.99% This APR may be applied to your account if you: 1.Make a late payment; 2.Go over your credit limit; 3.Make a payment that is returned; or 4.Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due. How to Avoid Paying Interest on Purchases Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month. Minimum Interest Charge If you are charged interest, the charge will be no less than $1.50. For Credit Card Tips from the Federal Reserve Board To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard Fees Set-up and Maintenance Fees NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209.  Annual Fee: $20  Account Set-up Fee: $20 (one-time fee)  Participation Fee: $12 annually ($1 per month)  Additional Card Fee: $5 annually (if applicable) Transaction Fees  Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)  Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater  Foreign Transaction: 2% of each transaction in U.S. dollars Penalty Fees  Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000  Over-the-limit: $29  Returned Payment: $35 * How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).” * Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill Minimum Interest Charge Credit card companies often have a minimum interest amount. These charges typically range from $0.50 to $2 per month and are disclosed in this section of the credit card offer What is the minimum interest charge for this credit card? $1.50

Credit Card 38 Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases 12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate. APR for Balance Transfers 15.99%  This APR will vary with the market based on the Prime Rate APR for Cash Advances21.99%  This APR will vary with the market based on the Prime Rate Penalty APR and When it Applies 28.99% This APR may be applied to your account if you: 1.Make a late payment; 2.Go over your credit limit; 3.Make a payment that is returned; or 4.Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due. How to Avoid Paying Interest on Purchases Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month. Minimum Interest Charge If you are charged interest, the charge will be no less than $1.50. For Credit Card Tips from the Federal Reserve Board To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard Fees Set-up and Maintenance Fees NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209.  Annual Fee: $20  Account Set-up Fee: $20 (one-time fee)  Participation Fee: $12 annually ($1 per month)  Additional Card Fee: $5 annually (if applicable) Transaction Fees  Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)  Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater  Foreign Transaction: 2% of each transaction in U.S. dollars Penalty Fees  Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000  Over-the-limit: $29  Returned Payment: $35 * How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).” * Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill For Credit Card Tips from the Federal Reserve Board This section directs consumers to the Federal Reserve website to obtain more information about credit cards

39 Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases 12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate. APR for Balance Transfers 15.99%  This APR will vary with the market based on the Prime Rate APR for Cash Advances21.99%  This APR will vary with the market based on the Prime Rate Penalty APR and When it Applies 28.99% This APR may be applied to your account if you: 1.Make a late payment; 2.Go over your credit limit; 3.Make a payment that is returned; or 4.Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due. How to Avoid Paying Interest on Purchases Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month. Minimum Interest Charge If you are charged interest, the charge will be no less than $1.50. For Credit Card Tips from the Federal Reserve Board To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard Fees Set-up and Maintenance Fees NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209.  Annual Fee: $20  Account Set-up Fee: $20 (one-time fee)  Participation Fee: $12 annually ($1 per month)  Additional Card Fee: $5 annually (if applicable) Transaction Fees  Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)  Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater  Foreign Transaction: 2% of each transaction in U.S. dollars Penalty Fees  Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000  Over-the-limit: $29  Returned Payment: $35 * How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).” * Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill Set-up and Maintenance Fees This section discloses any set- up and maintenance fees for the card, which can include annual fees, account set-up fees, participation fees, and additional card fees Annual fee is a yearly fee that may be charged for having a credit card What is the annual fee for this credit card? $20

Credit Card 40 Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases 12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate. APR for Balance Transfers 15.99%  This APR will vary with the market based on the Prime Rate APR for Cash Advances21.99%  This APR will vary with the market based on the Prime Rate Penalty APR and When it Applies 28.99% This APR may be applied to your account if you: 1.Make a late payment; 2.Go over your credit limit; 3.Make a payment that is returned; or 4.Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due. How to Avoid Paying Interest on Purchases Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month. Minimum Interest Charge If you are charged interest, the charge will be no less than $1.50. For Credit Card Tips from the Federal Reserve Board To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard Fees Set-up and Maintenance Fees NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209.  Annual Fee: $20  Account Set-up Fee: $20 (one-time fee)  Participation Fee: $12 annually ($1 per month)  Additional Card Fee: $5 annually (if applicable) Transaction Fees  Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)  Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater  Foreign Transaction: 2% of each transaction in U.S. dollars Penalty Fees  Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000  Over-the-limit: $29  Returned Payment: $35 * How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).” * Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill Transcation Fees This section discloses any transaction fees for the card, which can include balance transfer fees, cash advance fees, and foreign transaction fees What is the fee for cash advances for this card? $5 or 3% of the amount of each cash advance (whichever is greater)

41 Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases 12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate. APR for Balance Transfers 15.99%  This APR will vary with the market based on the Prime Rate APR for Cash Advances21.99%  This APR will vary with the market based on the Prime Rate Penalty APR and When it Applies 28.99% This APR may be applied to your account if you: 1.Make a late payment; 2.Go over your credit limit; 3.Make a payment that is returned; or 4.Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due. How to Avoid Paying Interest on Purchases Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month. Minimum Interest Charge If you are charged interest, the charge will be no less than $1.50. For Credit Card Tips from the Federal Reserve Board To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard Fees Set-up and Maintenance Fees NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209.  Annual Fee: $20  Account Set-up Fee: $20 (one-time fee)  Participation Fee: $12 annually ($1 per month)  Additional Card Fee: $5 annually (if applicable) Transaction Fees  Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)  Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater  Foreign Transaction: 2% of each transaction in U.S. dollars Penalty Fees  Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000  Over-the-limit: $29  Returned Payment: $35 * How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).” * Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill Penalty Fees This section discloses the penalty fees for the card, which can include late- payment, over-the-limit, and returned payment fees Late payment fee is charged when a cardholder does not make the minimum monthly payment by the due date Over-the-limit fee is charged if the account balance goes over the set credit limit Does this card have an over-the limit fee? Yes, the over-the-limit fee is $29.

Credit Card 42 Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases 12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate. APR for Balance Transfers 15.99%  This APR will vary with the market based on the Prime Rate APR for Cash Advances21.99%  This APR will vary with the market based on the Prime Rate Penalty APR and When it Applies 28.99% This APR may be applied to your account if you: 1.Make a late payment; 2.Go over your credit limit; 3.Make a payment that is returned; or 4.Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due. How to Avoid Paying Interest on Purchases Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month. Minimum Interest Charge If you are charged interest, the charge will be no less than $1.50. For Credit Card Tips from the Federal Reserve Board To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard Fees Set-up and Maintenance Fees NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209.  Annual Fee: $20  Account Set-up Fee: $20 (one-time fee)  Participation Fee: $12 annually ($1 per month)  Additional Card Fee: $5 annually (if applicable) Transaction Fees  Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)  Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater  Foreign Transaction: 2% of each transaction in U.S. dollars Penalty Fees  Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000  Over-the-limit: $29  Returned Payment: $35 * How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).” * Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill How we calculate your balance Credit card companies can use one of several methods to calculate the outstanding balance on a credit card. The method used is disclosed in this section What method is used to calculate the balance on this card? Average daily balance (including new purchases)

43 Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases 12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate. APR for Balance Transfers 15.99%  This APR will vary with the market based on the Prime Rate APR for Cash Advances21.99%  This APR will vary with the market based on the Prime Rate Penalty APR and When it Applies 28.99% This APR may be applied to your account if you: 1.Make a late payment; 2.Go over your credit limit; 3.Make a payment that is returned; or 4.Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due. How to Avoid Paying Interest on Purchases Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month. Minimum Interest Charge If you are charged interest, the charge will be no less than $1.50. For Credit Card Tips from the Federal Reserve Board To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard Fees Set-up and Maintenance Fees NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209.  Annual Fee: $20  Account Set-up Fee: $20 (one-time fee)  Participation Fee: $12 annually ($1 per month)  Additional Card Fee: $5 annually (if applicable) Transaction Fees  Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)  Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater  Foreign Transaction: 2% of each transaction in U.S. dollars Penalty Fees  Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000  Over-the-limit: $29  Returned Payment: $35 * How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).” * Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill Loss of Introductory APR If the card has an introductory rate, this area will list how the lower introductory rate can be lost How can the introductory APR be lost on this card? If the cardholder is more than 60 days late in paying the bill What APR will the cardholder be charged if the introductory rate is lost? The Penalty APR of 28.99%

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 44 Credit Card Chaos The educator will identify terms associated with a credit card offer Identify which term is true on your provided credit card offer and move to that poster In a small group, define the term on the poster As a class, discuss which credit card characteristic is better for a consumer and why

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 45 Credit Card Chaos Fixed-rate APR for Purchases vs. Variable-rate APR for Purchases Introductory Rate vs. No Introductory Rate APR for Purchases Greater than or Equal to 15% vs. APR for Purchases Less than 15% No Minimum Interest Charge vs Minimum Interest Charge Annual Fee vs. No Annual Fee Balance Transfer Fee vs. No Balance Transfer Fee Late Payment Fees vs. No Late Payment Fees

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 46 Credit Card Benefits Research benefits that may be received from the card – Cash rebates – Warranties for items purchased with the card – Travel accident insurance – Frequent flyer miles Make sure to know all terms and conditions of card benefits Cards that offer benefits may charge fees or higher interest rates

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 47 Receiving a Credit Card 1.Compare credit card offers and determine which card to apply for 2.Complete a credit application – A form requesting information about a person’s ability to repay and the applicant’s age – Can be completed through the mail, the internet or over the phone

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 48 Receiving a Credit Card 3. Lenders conduct a credit investigation – A comparison of information on credit application to information on a credit report 4. Applicants may or may not be approved for the card they apply for – Approval depends on the applicant's credit history

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 49 Pre-Approved Credit Card Applications Credit card companies send pre-approved credit card applications in the mail – If an individual is pre-approved for that particular card, they have passed the initial credit check

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 50 Credit Card Statements Credit card statements outline important information about the card The 2009 CARD Act required credit card companies to include specific information about a card account in the statement Andrew’s Credit Card Statement Please help Andrew interpret his credit card statement.

51 Transactions Reference NumberTrans DatePost Date Description of Transaction or CreditAmount XXXX12/222/23 Store #1$529.57 XXXX22/252/26 Payment$450.00 - XXXX32/26 Cash Advance$318.00 XXXX43/153/17 Balance Transfer$785.00 Fees XXXX52/23 Late Fee$35.00 XXXX62/27 Balance Transfer Fee$23.55 XXXX72/28 Cash Advance Fee$10.90 Total Fees for this Period$69.45 Interest Charged Interest Charge on Purchases$6.31 Interest Charge on Cash Advances$4.58 Total Interest for this Period$10.89 Payment Information New Balance$1784.53 Minimum Payment Due$53.00 Payment Due Date4/20/12 Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 fee and your APR’s may be increased up to the Penalty rate of 28.99% Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example… Interest Charge Calculation Type of BalanceAnnual Percentage Rate (APR)Balance Subject to Interest RateInterest Charge Purchases14.99%$512.14$6.31 Cash Advances21.99%$253.50$4.58 Balance Transfers0.00%$637.50$0.00 Summary of Account Activity Previous Balance535.07 Payments-450.00 Purchases+529.57 Balance Transfers+785.00 Cash Advances+318.00 Past Due Amount+0.00 Fees Charged+69.45 Interest Charged+10.89 New Balance$1,784.53 Credit Limit$2,000.00 Available credit$215.47 Statement closing date3/22/2012 Days in billing cycle30 If you make no additional charges using this card and each month you pay… You will pay off the balance shown on this statement in about… And you will end up paying an estimated total of… Only the minimum payment 10 years$3,284 $623 years$2,232 Notice of Changes to Your Interest Rates You have triggered the Penalty APR of 28.99%. This change will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, the Penalty APR will apply to these transactions. We may keep the APR at this level indefinitely. Transactions made before 4/9/12: Current rates will continue to apply to these transactions. If you become more than 60 days late on your account, the Penalty APR will apply to hose transactions as well. Important Changes to Your Account Terms The following is a summary of changes that are being made to your account terms. For more detailed information, please refer to the booklet enclosed with this statement. These changes will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, APR for Purchases will increase to 16.99%. Transactions made before 4/9/12: Current APRs will continue to apply to these transactions. 2012 Totals Year-to-Date Total fees charged in 2012$90.14 Total interest charged in 2012$18.27 Andrew’s Credit Card Statement Summary of Account Activity This section includes payments, credits, purchases, balance transfers, cash advances, fees, interest charges, amounts past due, the new balance, available credit, and the last day of the billing period How much did Andrew charge in new purchases during this credit card billing cycle? $529.57 10 9 8 7 6 2 4 5 1 3

52 Transactions Reference NumberTrans DatePost Date Description of Transaction or CreditAmount XXXX12/222/23 Store #1$529.57 XXXX22/252/26 Payment$450.00 - XXXX32/26 Cash Advance$318.00 XXXX43/153/17 Balance Transfer$785.00 Fees XXXX52/23 Late Fee$35.00 XXXX62/27 Balance Transfer Fee$23.55 XXXX72/28 Cash Advance Fee$10.90 Total Fees for this Period$69.45 Interest Charged Interest Charge on Purchases$6.31 Interest Charge on Cash Advances$4.58 Total Interest for this Period$10.89 Payment Information New Balance$1784.53 Minimum Payment Due$53.00 Payment Due Date4/20/12 Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 fee and your APR’s may be increased up to the Penalty rate of 28.99% Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example… Interest Charge Calculation Type of BalanceAnnual Percentage Rate (APR)Balance Subject to Interest RateInterest Charge Purchases14.99%$512.14$6.31 Cash Advances21.99%$253.50$4.58 Balance Transfers0.00%$637.50$0.00 Summary of Account Activity Previous Balance535.07 Payments-450.00 Purchases+529.57 Balance Transfers+785.00 Cash Advances+318.00 Past Due Amount+0.00 Fees Charged+69.45 Interest Charged+10.89 New Balance$1,784.53 Credit Limit$2,000.00 Available credit$215.47 Statement closing date3/22/2012 Days in billing cycle30 If you make no additional charges using this card and each month you pay… You will pay off the balance shown on this statement in about… And you will end up paying an estimated total of… Only the minimum payment 10 years$3,284 $623 years$2,232 Notice of Changes to Your Interest Rates You have triggered the Penalty APR of 28.99%. This change will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, the Penalty APR will apply to these transactions. We may keep the APR at this level indefinitely. Transactions made before 4/9/12: Current rates will continue to apply to these transactions. If you become more than 60 days late on your account, the Penalty APR will apply to hose transactions as well. Important Changes to Your Account Terms The following is a summary of changes that are being made to your account terms. For more detailed information, please refer to the booklet enclosed with this statement. These changes will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, APR for Purchases will increase to 16.99%. Transactions made before 4/9/12: Current APRs will continue to apply to these transactions. 2012 Totals Year-to-Date Total fees charged in 2012$90.14 Total interest charged in 2012$18.27 Andrew’s Credit Card Statement 10 9 8 7 6 2 4 5 1 3 Payment Information This section includes the total new balance, the minimum payment amount, and the date payment is due What is Andrew’s minimum payment due for this billing cycle? $53.00

53 Transactions Reference NumberTrans DatePost Date Description of Transaction or CreditAmount XXXX12/222/23 Store #1$529.57 XXXX22/252/26 Payment$450.00 - XXXX32/26 Cash Advance$318.00 XXXX43/153/17 Balance Transfer$785.00 Fees XXXX52/23 Late Fee$35.00 XXXX62/27 Balance Transfer Fee$23.55 XXXX72/28 Cash Advance Fee$10.90 Total Fees for this Period$69.45 Interest Charged Interest Charge on Purchases$6.31 Interest Charge on Cash Advances$4.58 Total Interest for this Period$10.89 Payment Information New Balance$1784.53 Minimum Payment Due$53.00 Payment Due Date4/20/12 Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 fee and your APR’s may be increased up to the Penalty rate of 28.99% Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example… Interest Charge Calculation Type of BalanceAnnual Percentage Rate (APR)Balance Subject to Interest RateInterest Charge Purchases14.99%$512.14$6.31 Cash Advances21.99%$253.50$4.58 Balance Transfers0.00%$637.50$0.00 Summary of Account Activity Previous Balance535.07 Payments-450.00 Purchases+529.57 Balance Transfers+785.00 Cash Advances+318.00 Past Due Amount+0.00 Fees Charged+69.45 Interest Charged+10.89 New Balance$1,784.53 Credit Limit$2,000.00 Available credit$215.47 Statement closing date3/22/2012 Days in billing cycle30 If you make no additional charges using this card and each month you pay… You will pay off the balance shown on this statement in about… And you will end up paying an estimated total of… Only the minimum payment 10 years$3,284 $623 years$2,232 Notice of Changes to Your Interest Rates You have triggered the Penalty APR of 28.99%. This change will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, the Penalty APR will apply to these transactions. We may keep the APR at this level indefinitely. Transactions made before 4/9/12: Current rates will continue to apply to these transactions. If you become more than 60 days late on your account, the Penalty APR will apply to hose transactions as well. Important Changes to Your Account Terms The following is a summary of changes that are being made to your account terms. For more detailed information, please refer to the booklet enclosed with this statement. These changes will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, APR for Purchases will increase to 16.99%. Transactions made before 4/9/12: Current APRs will continue to apply to these transactions. 2012 Totals Year-to-Date Total fees charged in 2012$90.14 Total interest charged in 2012$18.27 Andrew’s Credit Card Statement 10 9 8 7 6 2 4 5 1 3 Late Payment Warning This section states any additional fees and the higher interest rate that may be charged if a payment is late How much is Andrew’s late payment fee? $35

54 Transactions Reference NumberTrans DatePost Date Description of Transaction or CreditAmount XXXX12/222/23 Store #1$529.57 XXXX22/252/26 Payment$450.00 - XXXX32/26 Cash Advance$318.00 XXXX43/153/17 Balance Transfer$785.00 Fees XXXX52/23 Late Fee$35.00 XXXX62/27 Balance Transfer Fee$23.55 XXXX72/28 Cash Advance Fee$10.90 Total Fees for this Period$69.45 Interest Charged Interest Charge on Purchases$6.31 Interest Charge on Cash Advances$4.58 Total Interest for this Period$10.89 Payment Information New Balance$1784.53 Minimum Payment Due$53.00 Payment Due Date4/20/12 Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 fee and your APR’s may be increased up to the Penalty rate of 28.99% Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example… Interest Charge Calculation Type of BalanceAnnual Percentage Rate (APR)Balance Subject to Interest RateInterest Charge Purchases14.99%$512.14$6.31 Cash Advances21.99%$253.50$4.58 Balance Transfers0.00%$637.50$0.00 Summary of Account Activity Previous Balance535.07 Payments-450.00 Purchases+529.57 Balance Transfers+785.00 Cash Advances+318.00 Past Due Amount+0.00 Fees Charged+69.45 Interest Charged+10.89 New Balance$1,784.53 Credit Limit$2,000.00 Available credit$215.47 Statement closing date3/22/2012 Days in billing cycle30 If you make no additional charges using this card and each month you pay… You will pay off the balance shown on this statement in about… And you will end up paying an estimated total of… Only the minimum payment 10 years$3,284 $623 years$2,232 Notice of Changes to Your Interest Rates You have triggered the Penalty APR of 28.99%. This change will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, the Penalty APR will apply to these transactions. We may keep the APR at this level indefinitely. Transactions made before 4/9/12: Current rates will continue to apply to these transactions. If you become more than 60 days late on your account, the Penalty APR will apply to hose transactions as well. Important Changes to Your Account Terms The following is a summary of changes that are being made to your account terms. For more detailed information, please refer to the booklet enclosed with this statement. These changes will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, APR for Purchases will increase to 16.99%. Transactions made before 4/9/12: Current APRs will continue to apply to these transactions. 2012 Totals Year-to-Date Total fees charged in 2012$90.14 Total interest charged in 2012$18.27 Andrew’s Credit Card Statement 10 9 8 7 6 2 4 5 1 3 Minimum Payment Warning This section includes an estimate of how long it can take to pay off a credit card balance if only the minimum payment is made each month, and an estimate of the total amount paid, including interest, if the bill is paid in three years (assuming no additional charges are made) How long will it take Andrew to pay off the balance of his credit card if he only pays the minimum payment? 10 years

55 Transactions Reference NumberTrans DatePost Date Description of Transaction or CreditAmount XXXX12/222/23 Store #1$529.57 XXXX22/252/26 Payment$450.00 - XXXX32/26 Cash Advance$318.00 XXXX43/153/17 Balance Transfer$785.00 Fees XXXX52/23 Late Fee$35.00 XXXX62/27 Balance Transfer Fee$23.55 XXXX72/28 Cash Advance Fee$10.90 Total Fees for this Period$69.45 Interest Charged Interest Charge on Purchases$6.31 Interest Charge on Cash Advances$4.58 Total Interest for this Period$10.89 Payment Information New Balance$1784.53 Minimum Payment Due$53.00 Payment Due Date4/20/12 Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 fee and your APR’s may be increased up to the Penalty rate of 28.99% Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example… Interest Charge Calculation Type of BalanceAnnual Percentage Rate (APR)Balance Subject to Interest RateInterest Charge Purchases14.99%$512.14$6.31 Cash Advances21.99%$253.50$4.58 Balance Transfers0.00%$637.50$0.00 Summary of Account Activity Previous Balance535.07 Payments-450.00 Purchases+529.57 Balance Transfers+785.00 Cash Advances+318.00 Past Due Amount+0.00 Fees Charged+69.45 Interest Charged+10.89 New Balance$1,784.53 Credit Limit$2,000.00 Available credit$215.47 Statement closing date3/22/2012 Days in billing cycle30 If you make no additional charges using this card and each month you pay… You will pay off the balance shown on this statement in about… And you will end up paying an estimated total of… Only the minimum payment 10 years$3,284 $623 years$2,232 Notice of Changes to Your Interest Rates You have triggered the Penalty APR of 28.99%. This change will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, the Penalty APR will apply to these transactions. We may keep the APR at this level indefinitely. Transactions made before 4/9/12: Current rates will continue to apply to these transactions. If you become more than 60 days late on your account, the Penalty APR will apply to hose transactions as well. Important Changes to Your Account Terms The following is a summary of changes that are being made to your account terms. For more detailed information, please refer to the booklet enclosed with this statement. These changes will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, APR for Purchases will increase to 16.99%. Transactions made before 4/9/12: Current APRs will continue to apply to these transactions. 2012 Totals Year-to-Date Total fees charged in 2012$90.14 Total interest charged in 2012$18.27 Andrew’s Credit Card Statement 10 9 8 7 6 2 4 5 1 3 Notice of Changes to Your Interest Rates If a cardholder triggers the Penalty APR, the credit card issuer must notify them on their statement that their rates will be increasing Has Andrew triggered the Penalty APR? Yes, he will pay 28.99% on all transactions made after 4/9/12.

56 Transactions Reference NumberTrans DatePost Date Description of Transaction or CreditAmount XXXX12/222/23 Store #1$529.57 XXXX22/252/26 Payment$450.00 - XXXX32/26 Cash Advance$318.00 XXXX43/153/17 Balance Transfer$785.00 Fees XXXX52/23 Late Fee$35.00 XXXX62/27 Balance Transfer Fee$23.55 XXXX72/28 Cash Advance Fee$10.90 Total Fees for this Period$69.45 Interest Charged Interest Charge on Purchases$6.31 Interest Charge on Cash Advances$4.58 Total Interest for this Period$10.89 Payment Information New Balance$1784.53 Minimum Payment Due$53.00 Payment Due Date4/20/12 Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 fee and your APR’s may be increased up to the Penalty rate of 28.99% Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example… Interest Charge Calculation Type of BalanceAnnual Percentage Rate (APR)Balance Subject to Interest RateInterest Charge Purchases14.99%$512.14$6.31 Cash Advances21.99%$253.50$4.58 Balance Transfers0.00%$637.50$0.00 Summary of Account Activity Previous Balance535.07 Payments-450.00 Purchases+529.57 Balance Transfers+785.00 Cash Advances+318.00 Past Due Amount+0.00 Fees Charged+69.45 Interest Charged+10.89 New Balance$1,784.53 Credit Limit$2,000.00 Available credit$215.47 Statement closing date3/22/2012 Days in billing cycle30 If you make no additional charges using this card and each month you pay… You will pay off the balance shown on this statement in about… And you will end up paying an estimated total of… Only the minimum payment 10 years$3,284 $623 years$2,232 Notice of Changes to Your Interest Rates You have triggered the Penalty APR of 28.99%. This change will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, the Penalty APR will apply to these transactions. We may keep the APR at this level indefinitely. Transactions made before 4/9/12: Current rates will continue to apply to these transactions. If you become more than 60 days late on your account, the Penalty APR will apply to hose transactions as well. Important Changes to Your Account Terms The following is a summary of changes that are being made to your account terms. For more detailed information, please refer to the booklet enclosed with this statement. These changes will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, APR for Purchases will increase to 16.99%. Transactions made before 4/9/12: Current APRs will continue to apply to these transactions. 2012 Totals Year-to-Date Total fees charged in 2012$90.14 Total interest charged in 2012$18.27 Andrew’s Credit Card Statement 10 9 8 7 6 2 4 5 1 3 Important Changes to Your Account Terms In this section of the statement, cardholders must be notified of any raise in rates or fees or any other significant changes to the account Other than implementation of the Penalty APR, will there be any other changes to Andrew’s account terms? Yes, his APR for Purchases is increasing to 16.99%.

57 Transactions Reference NumberTrans DatePost Date Description of Transaction or CreditAmount XXXX12/222/23 Store #1$529.57 XXXX22/252/26 Payment$450.00 - XXXX32/26 Cash Advance$318.00 XXXX43/153/17 Balance Transfer$785.00 Fees XXXX52/23 Late Fee$35.00 XXXX62/27 Balance Transfer Fee$23.55 XXXX72/28 Cash Advance Fee$10.90 Total Fees for this Period$69.45 Interest Charged Interest Charge on Purchases$6.31 Interest Charge on Cash Advances$4.58 Total Interest for this Period$10.89 Payment Information New Balance$1784.53 Minimum Payment Due$53.00 Payment Due Date4/20/12 Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 fee and your APR’s may be increased up to the Penalty rate of 28.99% Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example… Interest Charge Calculation Type of BalanceAnnual Percentage Rate (APR)Balance Subject to Interest RateInterest Charge Purchases14.99%$512.14$6.31 Cash Advances21.99%$253.50$4.58 Balance Transfers0.00%$637.50$0.00 Summary of Account Activity Previous Balance535.07 Payments-450.00 Purchases+529.57 Balance Transfers+785.00 Cash Advances+318.00 Past Due Amount+0.00 Fees Charged+69.45 Interest Charged+10.89 New Balance$1,784.53 Credit Limit$2,000.00 Available credit$215.47 Statement closing date3/22/2012 Days in billing cycle30 If you make no additional charges using this card and each month you pay… You will pay off the balance shown on this statement in about… And you will end up paying an estimated total of… Only the minimum payment 10 years$3,284 $623 years$2,232 Notice of Changes to Your Interest Rates You have triggered the Penalty APR of 28.99%. This change will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, the Penalty APR will apply to these transactions. We may keep the APR at this level indefinitely. Transactions made before 4/9/12: Current rates will continue to apply to these transactions. If you become more than 60 days late on your account, the Penalty APR will apply to hose transactions as well. Important Changes to Your Account Terms The following is a summary of changes that are being made to your account terms. For more detailed information, please refer to the booklet enclosed with this statement. These changes will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, APR for Purchases will increase to 16.99%. Transactions made before 4/9/12: Current APRs will continue to apply to these transactions. 2012 Totals Year-to-Date Total fees charged in 2012$90.14 Total interest charged in 2012$18.27 Andrew’s Credit Card Statement 10 9 8 7 6 2 4 5 1 3 Transactions This section includes a list of all the transactions that have occurred since the last statement (purchases, payments, credits, cash advances, and balance transfers). This section should be carefully reviewed by the cardholder to ensure there are no unauthorized charges or errors How much did Andrew charge on his credit card to Store #1? $529.57

58 Transactions Reference NumberTrans DatePost Date Description of Transaction or CreditAmount XXXX12/222/23 Store #1$529.57 XXXX22/252/26 Payment$450.00 - XXXX32/26 Cash Advance$318.00 XXXX43/153/17 Balance Transfer$785.00 Fees XXXX52/23 Late Fee$35.00 XXXX62/27 Balance Transfer Fee$23.55 XXXX72/28 Cash Advance Fee$10.90 Total Fees for this Period$69.45 Interest Charged Interest Charge on Purchases$6.31 Interest Charge on Cash Advances$4.58 Total Interest for this Period$10.89 Payment Information New Balance$1784.53 Minimum Payment Due$53.00 Payment Due Date4/20/12 Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 fee and your APR’s may be increased up to the Penalty rate of 28.99% Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example… Interest Charge Calculation Type of BalanceAnnual Percentage Rate (APR)Balance Subject to Interest RateInterest Charge Purchases14.99%$512.14$6.31 Cash Advances21.99%$253.50$4.58 Balance Transfers0.00%$637.50$0.00 Summary of Account Activity Previous Balance535.07 Payments-450.00 Purchases+529.57 Balance Transfers+785.00 Cash Advances+318.00 Past Due Amount+0.00 Fees Charged+69.45 Interest Charged+10.89 New Balance$1,784.53 Credit Limit$2,000.00 Available credit$215.47 Statement closing date3/22/2012 Days in billing cycle30 If you make no additional charges using this card and each month you pay… You will pay off the balance shown on this statement in about… And you will end up paying an estimated total of… Only the minimum payment 10 years$3,284 $623 years$2,232 Notice of Changes to Your Interest Rates You have triggered the Penalty APR of 28.99%. This change will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, the Penalty APR will apply to these transactions. We may keep the APR at this level indefinitely. Transactions made before 4/9/12: Current rates will continue to apply to these transactions. If you become more than 60 days late on your account, the Penalty APR will apply to hose transactions as well. Important Changes to Your Account Terms The following is a summary of changes that are being made to your account terms. For more detailed information, please refer to the booklet enclosed with this statement. These changes will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, APR for Purchases will increase to 16.99%. Transactions made before 4/9/12: Current APRs will continue to apply to these transactions. 2012 Totals Year-to-Date Total fees charged in 2012$90.14 Total interest charged in 2012$18.27 Andrew’s Credit Card Statement 10 9 8 7 6 2 4 5 1 3 Fees and Interest Charged Credit card issuers must list the fees and interest charges separately on the monthly statement. Interest charges must be listed by type of transaction Did Andrew pay a late fee? Yes, he paid $35.00 for a late fee.

59 Transactions Reference NumberTrans DatePost Date Description of Transaction or CreditAmount XXXX12/222/23 Store #1$529.57 XXXX22/252/26 Payment$450.00 - XXXX32/26 Cash Advance$318.00 XXXX43/153/17 Balance Transfer$785.00 Fees XXXX52/23 Late Fee$35.00 XXXX62/27 Balance Transfer Fee$23.55 XXXX72/28 Cash Advance Fee$10.90 Total Fees for this Period$69.45 Interest Charged Interest Charge on Purchases$6.31 Interest Charge on Cash Advances$4.58 Total Interest for this Period$10.89 Payment Information New Balance$1784.53 Minimum Payment Due$53.00 Payment Due Date4/20/12 Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 fee and your APR’s may be increased up to the Penalty rate of 28.99% Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example… Interest Charge Calculation Type of BalanceAnnual Percentage Rate (APR)Balance Subject to Interest RateInterest Charge Purchases14.99%$512.14$6.31 Cash Advances21.99%$253.50$4.58 Balance Transfers0.00%$637.50$0.00 Summary of Account Activity Previous Balance535.07 Payments-450.00 Purchases+529.57 Balance Transfers+785.00 Cash Advances+318.00 Past Due Amount+0.00 Fees Charged+69.45 Interest Charged+10.89 New Balance$1,784.53 Credit Limit$2,000.00 Available credit$215.47 Statement closing date3/22/2012 Days in billing cycle30 If you make no additional charges using this card and each month you pay… You will pay off the balance shown on this statement in about… And you will end up paying an estimated total of… Only the minimum payment 10 years$3,284 $623 years$2,232 Notice of Changes to Your Interest Rates You have triggered the Penalty APR of 28.99%. This change will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, the Penalty APR will apply to these transactions. We may keep the APR at this level indefinitely. Transactions made before 4/9/12: Current rates will continue to apply to these transactions. If you become more than 60 days late on your account, the Penalty APR will apply to hose transactions as well. Important Changes to Your Account Terms The following is a summary of changes that are being made to your account terms. For more detailed information, please refer to the booklet enclosed with this statement. These changes will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, APR for Purchases will increase to 16.99%. Transactions made before 4/9/12: Current APRs will continue to apply to these transactions. 2012 Totals Year-to-Date Total fees charged in 2012$90.14 Total interest charged in 2012$18.27 Andrew’s Credit Card Statement 10 9 8 7 6 2 4 5 1 3 Year-to-Date Totals The total amount paid in fees and interest charges for the current year must be shown on the statement What is the total amount of interest Andrew has paid in the year 2012? $18.27

60 Transactions Reference NumberTrans DatePost Date Description of Transaction or CreditAmount XXXX12/222/23 Store #1$529.57 XXXX22/252/26 Payment$450.00 - XXXX32/26 Cash Advance$318.00 XXXX43/153/17 Balance Transfer$785.00 Fees XXXX52/23 Late Fee$35.00 XXXX62/27 Balance Transfer Fee$23.55 XXXX72/28 Cash Advance Fee$10.90 Total Fees for this Period$69.45 Interest Charged Interest Charge on Purchases$6.31 Interest Charge on Cash Advances$4.58 Total Interest for this Period$10.89 Payment Information New Balance$1784.53 Minimum Payment Due$53.00 Payment Due Date4/20/12 Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 fee and your APR’s may be increased up to the Penalty rate of 28.99% Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example… Interest Charge Calculation Type of BalanceAnnual Percentage Rate (APR)Balance Subject to Interest RateInterest Charge Purchases14.99%$512.14$6.31 Cash Advances21.99%$253.50$4.58 Balance Transfers0.00%$637.50$0.00 Summary of Account Activity Previous Balance535.07 Payments-450.00 Purchases+529.57 Balance Transfers+785.00 Cash Advances+318.00 Past Due Amount+0.00 Fees Charged+69.45 Interest Charged+10.89 New Balance$1,784.53 Credit Limit$2,000.00 Available credit$215.47 Statement closing date3/22/2012 Days in billing cycle30 If you make no additional charges using this card and each month you pay… You will pay off the balance shown on this statement in about… And you will end up paying an estimated total of… Only the minimum payment 10 years$3,284 $623 years$2,232 Notice of Changes to Your Interest Rates You have triggered the Penalty APR of 28.99%. This change will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, the Penalty APR will apply to these transactions. We may keep the APR at this level indefinitely. Transactions made before 4/9/12: Current rates will continue to apply to these transactions. If you become more than 60 days late on your account, the Penalty APR will apply to hose transactions as well. Important Changes to Your Account Terms The following is a summary of changes that are being made to your account terms. For more detailed information, please refer to the booklet enclosed with this statement. These changes will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, APR for Purchases will increase to 16.99%. Transactions made before 4/9/12: Current APRs will continue to apply to these transactions. 2012 Totals Year-to-Date Total fees charged in 2012$90.14 Total interest charged in 2012$18.27 Andrew’s Credit Card Statement 10 9 8 7 6 2 4 5 1 3 Interest Charge Calculation This section includes a summary of the interest rates on the different types of transactions, account balances, the amount of each, and the interest charged for each type of transaction What interest rate is Andrew paying on cash advances? 21.99%

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 61 Cardholder Protections & Rights Truth in Lending Act Limits liability for unauthorized credit card charges to $50.00 per card Must write a letter within 60 days of the first bill containing the error If a credit card number is used fraudulently but the card itself was not used, the individual has no personal liability

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 62 Cardholder Protections & Rights – To receive a credit card, consumers must be 21 years of age or older Consumers under 21 have to either have a co-signer or show documentation of sufficient income to make payments If someone agrees to be a co-signer on an account, they are equally responsible for the loan – Interest rates on existing balances generally can’t be raised unless a cardholder is 60 days or more past due 2009 CARD Act

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 63 Cardholder Protections & Rights – Must be notified of any significant changes in rates and fees at least 45 days before the changes take effect Any changes made to an account can only apply to future transactions (new charges) Have the option of closing the account before the changes go into effect – Cardholders now have to “opt-in” to allowing transactions that take them over their credit limit 2009 CARD Act

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 64 Cardholder Protections & Rights – Credit card issuers are required to send a monthly statement at least 21 days before a credit card payment is due – Credit card payment due dates must be consistent month to month 2009 CARD Act

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 65 Cardholder Protections & Rights – Credit card companies cannot increase rates for the first 12 months after an account is open unless: The card has a variable interest rate The cardholder is more than 60 days late in paying their bill The card has an introductory rate (the introductory rate must be in place for at least 6 months and then the rate can increase) 2009 CARD Act

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 66 Cardholder Protections & Rights – Some set-up and maintenance fees are charged before the card is used – This may reduce the amount of credit initially available These non-penalty fees cannot exceed 25% of the initial credit limit For example, if a card has a credit limit of $1,000 the total fees for the first year (not including penalty fees) cannot exceed $250 2009 CARD Act

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 67 Credit Card Safety Tips Sign card with a signature and “Please see ID” Do not leave cards lying around, and report lost or stolen cards promptly Close unwanted accounts by writing and phone, then cut up the card Do not give out account numbers unless making a purchase Keep a list of all cards, account numbers, and phone lists separate from cards Shred all pre-approved credit card offers, applications, or solicitations

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 68 Online Shopping Safety Tips 1. Use a temporary credit card number – This is a one-time use only number – A set amount will be charged to your credit card – Then a number will be given to you to do your shopping 2. Use a credit card rather than a debit card – Fair Credit Billing Act

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 69 Fair Credit Billing Act Helps to protect consumers while using a credit card to make purchases Allows the consumer to not pay for a product or service for which the consumer has a complaint If products are not delivered or if it is not what the consumer requested, any amount of money that was credited to the card above the $50.00 fee that consumers are responsible for will be issued back Debit cards do not have the same protection

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 70 Summary A credit card is pre-approved credit which can be used for the purchase of goods and services now and payment of them later To avoid paying interest on a credit card, pay the balance in full every month A credit card can have a positive or a negative impact on an individual’s credit history

Credit Card © Family Economics & Financial Education –Updated March 2010– 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 Credit Card 1.4.1.G1 71 Summary Credit card companies are required to disclose the terms and fees of a credit card in the Schumer’s box Credit card statements outline important information about a credit card and should be checked carefully for errors Consumers have many protections and rights in regards to credit card use

72 Credit Card Trivia

Credit Card Understanding Your Credit Card Credit Cards 101 Trivia

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 74 Trivia Instructions Divide the students into teams of 3-5 Provide each team with a white board and a dry erase marker Have each team create a team name and write it on the board where points are being tallied Choose a team to select a category and point value Read the question and allow all of the teams 10 seconds to write their response on the paper

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 75 Trivia Instructions Have the students hold their answers up at the same time Each time, award every team who answered the question correctly the money value indicated by the question – If they answer incorrectly, the teacher may take away the point value Allow the next team to choose the category and point value Continue until all of the questions have been answered The team with the most money at the end wins

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 76 Credit Cards 101 Trivia TerminologySchumer BoxCredit History Credit Card Knowledge $100 $200 $300 $400 Final Trivia

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 77 Terminology- $100 Answer: A yearly fee that may be charged for having a credit card.

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 78 Terminology- $100 Question: What is an annual fee?

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 79 Answer: When a consumer has passed an initial credit check. Terminology- $200

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 80 Terminology- $200 Question: What is pre-approved?

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 81 Terminology- $300 Answer: A loan which the borrower must repay the amount in a specified number of equal payments.

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 82 Terminology- $300 Question: What is closed-end credit?

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 83 Terminology$400 Answer: A plastic card that is electronically connected to the cardholder’s bank account.

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 84 Terminology- $400 Question: What is a debit card?

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 85 Schumer Box- $100 Answer: The cost of credit expressed as a yearly interest rate.

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 86 Schumer Box- $100 Question: What is the annual percentage rate (APR)?

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 87 Schumer Box - $200 Answer: Transferring debt from one credit card account to another.

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 88 Schumer Box - $200 Question: What is a balance transfer?

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 89 Schumer Box - $300 Answer: The interest rate charged right after a credit card account is opened.

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 90 Schumer Box - $300 Question: What is introductory rate?

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 91 Schumer Box - $400 Answer: The interest rate charged on new transactions if the penalty terms in the credit card contract are triggered.

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 92 Schumer Box - $400 Question: What is penalty APR?

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 93 Credit History- $100 Answer: An individual’s ability and willingness to pay money back.

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 94 Credit History-- $100 Question: What is creditworthiness?

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 95 Credit History - $200 Answer: A record of a consumer’s credit history.

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 96 Credit History - $200 Question: What is credit report ?

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 97 Credit History - $300 Answer: A number that summarizes an individual’s credit record and history.

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 98 Credit History - $300 Question: What is a credit score?

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 99 Credit History - $400 Answer: An example of positive credit card use.

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 100 Question: What is: Paying card balances in full every month Paying card bills on time Applying for only cards that are needed Keeping track of all charges Checking monthly card statement for errors Credit History- $400

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 101 Answer: Outlines important information about a credit card, including transactions the cardholder has made during that billing cycle and the current balance on the credit card. Credit Card Knowledge - $100

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 102 Credit Card Knowledge - $100 Question: What is a credit card statement?

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 103 Answer: The cardholder’s liability for unauthorized credit card charges under the Truth in Lending Act. Credit Card Knowledge - $200

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 104 Credit Card Knowledge - $200 Question: What is $50.00?

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 105 Credit Card Knowledge - $300 Answer: The maximum amount of charges allowed to the account.

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 106 Credit Card Knowledge - $300 Question: What is the credit limit?

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 107 Credit Card Knowledge - $400 Answer: To increase credit card safety, the back of the card should include the cardholder’s signature and this.

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 108 Credit Card Knowledge - $400 Question: What is “Please see ID?”

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 109 Final Trivia

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 110 Final Trivia Answer: An APR that may change depending on other factors, such as the prime rate.

© Family Economics & Financial Education –Updated March 2010– Credit Unit – Credit Card Trivia 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 Credit Card 1.4.1.G2 111 Final Trivia Question: What is variable-rate APR?

112 Jump$tart Principle, “Compare Interest Rates.” Ask students to write a brief answer to the following questions:  Why do you need to compare interest rates?  What other factors do you need to compare and why? Discuss their answers as a class reviewing points on interest, APR, minimum payment, length of loans, and how they impact total cost. Journal Entry

113 1. Limits current buying __________ as income is required to pay old debts 2. Makes recordkeeping __________ 3. May lead to over-__________ 4. If debts are not repaid, merchandise may be __________ by creditors 5. May lead to __________ purchases Advantages and Disadvantages of Using Credit

114 1. If debts are not repaid, __________ may be damaged 2. Allows consumers to purchase __________ items they would not otherwise be able to purchase 3. If credit rating becomes poor, could impact ability to get __________ in future 4. Provides a sense of __________ because of having the means to pay for emergencies 5. Allows use of goods and services before or while __________ for them Advantages and Disadvantages of Using Credit

115 1. Good credit shows that a person is financially __________ 2. Bad credit shows that a person is financially __________ 3. Initially __________ a borrower’s income 4. Must protect credit cards from __________ use Advantages and Disadvantages of Using Credit

116 1. Usually makes __________ items easier 2. Convenient to use 3. Credit not always __________ 4. When used responsibly, helps __________ good credit 5. May lose track of how much has been __________ Advantages and Disadvantages of Using Credit

117 1. Enables consumers to make purchases __________ and by telephone 2. Can be used to buy a variety of __________ and services 3. Typically pay more because of __________ charges 4. Keeps consumers from having to carry __________ 5. Retailers increase prices to cover costs of credit and bad __________ Advantages and Disadvantages of Using Credit

118 Establish Credit The importance of credit ratings Credit ratings are based on the three Cs  Character  Capacity  Capital Ways to establish credit  Open/manage checking/saving accounts  Pay utility bills in your name  Obtain a credit card from a local store  Get help from a cosigner  Obtain a secured credit card

119 Creditors only lend to people who can be expected to pay them back Creditors look at credit-related information to determine if one is a good risk A creditor’s evaluation of one’s ability and willingness to repay debts is a credit rating Credit ratings are based on 3 Cs Character---a person’s reputation for being honest and their financial history Capacity---a person’s employment history and ability to earn money Capital---a person’s financial worth Ways to establish credit Establishing Credit

120 Loan Sources Preferred lenders Most reliable lenders Examples: banks, credit unions, savings and loan associations, consumer finance companies, insurance policy loans, credit card companies, private loans Non-preferred lenders May take advantage of people with poor credit; typically charge high interest rates Examples: “payday” lenders, pawnbrokers, loan sharks, auto title loan lenders, tax refund loan

121 Considerations When Shopping for Credit Conditions of loans  Annual fees  Annual percentage rate (APR)---the amount and whether it changes  Method used to calculate interest  Minimum payment  Grace period  Minimum finance charge and other fees  Credit limit  Special features and services

122 Considerations When Shopping for Credit Cautions when seeking loans  Always “read the fine print” and know the terms of loans before signing  Consider if this would be wise or unwise use of credit  Remember that, once signed, borrowers are bound by the terms of the agreement  Consumers can apply for loans in person, online, over the telephone or in writing  Typically, provide information about income, employment history, residence, credit history  The lender will likely run a credit check.  If approved, borrowers may have right to rescission (cancel) within three days if they choose; a provision of the Truth in Lending Act

123 Review these explanations and examples to aid in understanding types of sales credit. Types of Sales Credit

124 Sales credit-credit to purchase goods and services from retailers  Regular charge account Borrower promises to pay in full within 20-30 days If not paid in time, there is a finance charge Example: Accounts with utility companies

125 Installment account  Borrowers agree to schedule of payments of equal dollar amounts, including interest  Creditors hold the title or “own” the merchandise until payments are complete.  Borrowers typically asked to sign a written contract  A small down payment may be required  Examples: Accounts used to purchase appliances and furniture

126 Revolving credit account  Borrowers may choose to pay in full each month or spread payments over time  A minimum payment (a percentage of unpaid balance) must be made each month  Unpaid balance may be carried over  A finance charge is applied to the unpaid balance.  The lender sets a credit limit for the borrower  Examples: Retail stores (Target, Sears); credit card issuers (Visa, MasterCard)

127 Types of Cash Credit Review these explanations and examples to aid in understanding types of cash credit.

128 Cash credit-money granted by a financial institution to use for a variety of purposes; may be secured or unsecured; may be installment, single-payment, or credit card/check credit loans  Unsecured loans Require borrower’s signature as evidence of agreement with terms of the loan No collateral required Generally available for borrowers with a good credit history

129 Secured loans  Require some form of collateral (property) to secure the loan  Collateral reduces lender’s risk; can take property if the borrower does not repay  A cosigner can sign the loan if a borrower has neither collateral nor good credit  Cosigner typically has good credit and agrees to pay if borrower fails to repay

130 Types of cash credit  Installment loans---provide a specific amount of money with promise of repayment with interest according to a schedule of monthly payments in a set amount  Single-payment loans---with collateral, provide a specific amount of money with the promise of repayment with interest in a single payment at a specified time.

131 Credit card/check credit loans---allow borrowers to use their credit cards to obtain money or write a check connected to the card account knowing the bank will cover up to a given maximum amount; borrowers repay with interest Company or retail store credit card loan  Issued by service stations, local merchants, or chain stores  Charge purchases ONLY with the merchant issuing the card  A credit limit and minimum monthly payments are common  Examples: Gasoline accounts and chain stores (Belk, Sears, Target)

132 Travel and entertainment credit card loan  Generally no credit limit, but account balance must be paid in full each month  For travel-related expenses only, such as airfare, tours, hotel expenses, etc.  May be paid off over time  Interest rates of 18% or more are common  Examples: American Express and AAA Travel Card

133 General-purpose credit card loan  Issued by banks, credit unions, and other financial institutions  Can be used to make purchases around the world where they are accepted  Cash can often be withdrawn from teller machines using these cards  Cards have a credit limit and require a minimum monthly payment  Finance charges/fees vary depending on card, issuer, and credit history  Examples: Visa, MasterCard, and Discover

134 Activity Cs and Ps of Credit Loans  Handout Available

135 Activity Cs and Ps of Credit Loans  Handout Available

136 Activity Discuss why creditors rely on the 3 Cs when evaluating credit. Emphasize that the lender’s view of the applicant’s credit worthiness determines approval, and lenders may use different guidelines.

137 Journal Entry Jump$tart principle: “Your credit past if your credit future.” Ask student to write a paragraph explaining why this is true based on what they learned in the “Understanding Credit Cards PowerPoint.”

138 Activity Play one of two PSA videos on http://www.ftc.gov/freereports http://www.ftc.gov/freereports Have students explore the Federal Trade Commission website http://www.ftc.gov/freereports to find information on how to obtain a credit report. http://www.ftc.gov/freereports Discuss the three major credit reporting agencies--- Equifax, Experian, and TransUnion---and what they do.

139 Maintaining Good Credit Evaluate the need to borrow. Can the purchase be avoided, delayed or bought on lay-away? Identify and use the right type of credit for the intended purchase and shop for the best terms Know how you will pay it back before you borrow Only use the amount of credit that you can afford to repay Meet all the terms of credit contracts and agreements Keep accurate records of charges, statements, and payments Consult creditors immediately if you cannot pay on time Resolve billing errors promptly

140 Credit Reports A credit report is like a report card reflecting how well a person has used credit resources Credit reporting agencies maintain records on how people manage their credit accounts Equifax, Experian, and TransUnion are three national credit- reporting agencies Contains information about employment history, credit accounts, balances, payment patterns Consumers should check each of the three credit reports annually to verify accuracy The Fair Credit Reporting Act---can get a free copy of credit reports every 12 months The FTC site http://www.ftc.gov/freereports explains how to obtain the free reportshttp://www.ftc.gov/freereports

141 Signs of a Debt Problem Consumers find themselves stressed and constantly worrying over their finances Having no savings Having reached the credit limit on most of their credit cards Skipping payments on some bills in order to pay others Using cash advances on one credit card to pay another Relying on credit cards to purchase day-to-day items like groceries and fast food Relying on credit cards to pay monthly bills Opening new credit card accounts in response to reaching the credit limit on others Regularly receiving contacts from creditors/collection agencies trying to collect unpaid debts

142 Strategies For Getting Out of Debt Actively deal with the problem; ignoring it will only make it worse Stop using credit; focus on repaying the debt owed Get help from trained people---a credit counselor or credit counseling service Develop a spending plan that includes living expenses and debt repayment funds. Contact creditors immediately, let them know your situation, ask to have credit terms adjusted

143 Bankruptcy, a Last Resort Legal relief or forgiveness from repaying certain debt Try to deal with debts using all means available before filing for bankruptcy Bankruptcy carries serious, long-term consequences---part of one’s credit report for ten years Chapter 7---must sell certain personal belongings, use proceeds to repay debts Chapter 13---can retain most personal property, but must propose a repayment plan, go to credit counseling, receive financial management education, and be employed

144 Journal Entry Jump$tart Principle: “Don’t borrow what you can’t repay.” Divide students into teams of four and have each team create a tip sheet, pamphlet, or bulletin board on one of the following topics keeping the Jump$tart principle as a guide:  Tips on credit card use  Tips on establishing & maintaining a good credit rating  Tips on getting out of debt  Tips on knowing when and why to borrow

145 Consumer Credit Laws at a Glance Laws have been passed to help creditors and protect and inform consumers

146 Laws to protect consumer access to credit o The Equal Credit Opportunity Act prohibits creditors from discriminating on the basis of sex, marital status, race, national origin, religion, age, or the receipt of public assistance. If credit is denied, creditors are required to provide a written statement explaining why credit was denied.

147 Laws requiring lenders to deal fairly with consumers o Truth in Lending Act requires lenders to disclose the terms of credit and loan agreements. Specific information, such as APR, how variable rates are calculated, when payments are due, and all fees are required to be disclosed to the consumer.

148 Laws requiring lenders to deal fairly with consumers o The Fair Credit Reporting Act guarantees consumers the right to access their credit file and dispute incorrect information. Consumers are entitled to one free credit report from each of the three national credit bureaus each year. If errors are noted, consumers can dispute the information in their file. Inaccurate information must be corrected or removed. If the dispute cannot be resolved, consumers can request that their version of the situation be included in their file

149 Laws requiring lenders to deal fairly with consumers o The Fair Credit Billing Act outlines steps for settling credit card billing disputes. This legislation states that consumers should write a letter containing the account holder’s name, account number, and a detailed description of the problem to the creditor using the address on the billing statement for billing errors. The letter and supporting documents, such as receipts, should be mailed certified mail and received by the company within 60 days of the consumer first receiving the bill containing errors. The law states that the company has to respond within 30 days and resolve the claim within 90 days. If the credit company finds that there was a billing error, they are required to credit the borrowers account for the amount of the charge and any related interest incurred. If they find that the charge is legitimate, the consumer must pay the amount billed and any related interest incurred.

150 Laws requiring lenders to deal fairly with consumers o The Fair Debt Collection Practices Act protects consumers against unfair methods of collecting debts. Consumers are protected against such practices as publicizing their debt to others, the use of threats or abusive language, being contacted at inconvenient times, etc.

151 Laws requiring lenders to deal fairly with consumers o The Credit CARD Act of 2009 establishes new and extensive law requiting lenders to disclose information to aid consumers in managing their credit accounts. The law stipulates minimum days of payment

152 Laws establishing and limiting consumer liability o The Electronic Funds Transfer Act protects consumers who use cards that use electronic impulses instead of cash, checks or paper records to activate financial transactions. This law makes the following provisions: consumers must request (EFT) cards, consumer’s rights and responsibilities for using EFT cards must be provided to the consumer, establishes limited liability ($50) to the consumer for unauthorized use, requires paper receipts for transactions, issuers are required to promptly address and correct EFT errors

153 Consumer Protections

154 News The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 offers consumers a new set of protections by prohibiting certain lender practices. The legislation also benefits consumers because all credit card accounts, also known as open-ended credit accounts, must abide by these rules. As a result, consumers are freed from the burden of understanding and keeping track of a wide range of lender-specific rules. The following are a summary of some of the key provisions of the CARD Act

155 The following are prohibited practices as of February 22, 2010: Changing the interest rate at any time for any reason: Card issuers must notify the consumer in writing the reasons for rate increases. A limit on the period penalty rates can be charged: Penalty interest rates can be charged for a maximum of six months provided the consumer makes on-time payments during the penalty period

156 The following are prohibited practices as of February 22, 2010: The same criteria must be used for increasing and lowering interest rates: After a six month penalty interest rate period, the account must be re-evaluated for a lower interest rate. If credit reports, general economy or other measures of credit worthiness were used to justify the rate increase these same measures must be used to determine a lower interest rate.

157 The following are prohibited practices as of February 22, 2010: Changing the interest rate on existing balances: Interest rate increases must be applied to new balances occurring on or after the effective date for the new rate. Double-cycle billing: Interest cannot be charged on the previous month’s balance regardless of whether or not the balance was paid in full.

158 The following are prohibited practices as of February 22, 2010: Late fee traps: Payments cannot be considered late when the due date falls on a date the lender was closed such as weekends, holidays, or other dates the lender is closed. Mid-day due dates: Payment cannot be required to be received by a specific time during the day, such as noon or 3:00pm. All payments received by 5:00pm on the due date must be counted as on-time.

159 The following are prohibited practices as of February 22, 2010: Changing due dates: Due dates can no longer change each month. The account due date must be the same each month. For example: April 5th, May 5th, and June 5th.

160 The following are prohibited practices as of February 22, 2010: Payment method fees: Lenders may not charge a fee for account payments made by telephone or over the internet. However, a fee may be charged for expedited payment service by a customer service representative.

161 Journal Entry What I know about Credit!

1 Personal Finance 7.02: Understand ways to protect personal credit.

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1 Personal Finance 7.02: Understand ways to protect personal credit.

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