1. Hidden Cost of Credit How creditors win and you lose

2. Learning Objective  Define the terms annual fee, credit limit, finance charge, origination fee, loan term, grace period, annual percentage rate, and introductory rate.

3. Opening Activity  Besides interest, what else allows credit card companies to make money?

4. Hidden Cost Terminology  Annual Fee  Credit Limit  The fee a credit card company charges for the use of their credit card.  The maximum amount of money the lender is willing to loan an applicant.

5. HC ….Terms….  Finance Charge  Origination Fee  The total cost of using credit, including interest and fees.  Charge for setting up a loan (often associated with home loans).

6. …..Terms…..  Loan Term  Grace Period  Length of time you have to pay the loan. Remember, the longer the loan, the lower the payment and the greater the interest paid.  Length of time the lender charges no interest on money borrowed when paying off your balance in full each month.

7. …..Terms…..  Annual Percentage Rate (APR)  The cost of the loan each year expressed as a percentage. All lenders are required by law to calculate APR the same way.

8. …….terms.  Introductory Rate  Lower interest rate offered by credit card companies, usually for a short time to entice you to sigh up for credit with them. Eventually the new rate expires and a new “increased” rate takes effect.

9. Summary  If you are going to have a credit card, shop around to ensure the terms are in your favor  DO NOT PAY late  If you pay late be ready for them to increase your interest rate

10. Exit Activity  Looping Vocabulary Game

11. Additional Time:  Look at real life credit card applications

12. Discussion Q’s  Explain when this credit card company can adjust the APR. This company can adjust the APR at any time and for any reason for failing to comply with the terms. This includes late payments, defaulting on the bill, not making minimum payments, or exceeding the credit limit.

13.  What is the annual fee for having this credit card?  There is no annual fee for this credit card.

14.  What is the grace period on this card?  The grace period is at least 20 days.

15.  What is the special introductory rate for this card?  There is no special introductory rate on this card.

16.  How much will it cost, in fees, to transfer a $1000 balance to this card?  $1000 x 3%=$30

17. Discussion Q’s continued….  What is the charge if you exceed your credit limit? $39

18.  What will your charge be if your payment is late, and how will it affect your APR?  Your late charge will be $15, $29, or $39 depending on the balance of your credit card. Your APR will most likely increase.