PERSONAL FINANCE
Credit Cards
UNITED STATES TOTAL DEBT
Website:
https://www.newyorkfed.org/microeconomi
cs/hhdc.html
Complete worksheet and be prepared to
discuss questions.
DISCUSSION PROMPT
Do you think it’s a good idea for high school
students to have a credit card?
What about college students?
Adults?
Explain why
QUESTION:
Prior years was
How can I get credit?
Now it is
How can I wisely manage credit?
WHAT YOUNG ADULTS SAY
ABOUT CREDIT CARDS
https://www.youtube.com/watch?v=NtXwlU
DK2co
After hearing the opinions of the students in
this video, do you think YOU would want a
credit card in college? Why or why not?
CREDIT CARD BASICS
https://www.youtube.com/watch?v=-OSc-M
m0tJo#t=44
In your notes, summarize the Difference
between credit & debit
Three types of credit cards, and
At least 3 benefits of using a credit card for
purchases.
COSTS WHAT?! - CREDIT CARD
PREMIER
http://www.thirteen.org/finance/games/itc
ostswhat_creditcard.html
Read the text & push NEXT on this
interactive to learn about credit cards.
Then, take the 6-question quiz to test what
you've learned.
CREDIT CARDS
The credit of today
Transactions that require a credit card
Log into Lapointe’s Padlet:
https://padlet.com/jl01128/vd6yrfvgtf40
Storesare encouraging customers to use their
credit cards to purchase goods & services
Log into Lapointe’s Padlet: Which stores are famous
for their department store credit cards.
https://padlet.com/jl01128/p2y5bkgn0hyh
People have overextended their credit. Part of
lifestyle – making ends meet.
CREDIT CARDS: ADVANTAGES &
DISADVANTAGES
Advantages
Used correctly – expands purchasing power & raise
your standard of living
Provides emergency funds – if you don’t have the
cash
Line of credit - money available when you need it
Convenient and better service (for ex. Problem
with purchase – withhold payment)
Deferred Billing
Service available to charge customers where payment is
billed at a later date. For example – item purchased in
October billed in January, payment is due February
CREDIT CARDS: ADVANTAGES & DISADVANTAGES
Disadvantages
Credit purchases might cost more than cash
Merchants must pay fees – usually a % of the sale at no
additional cost to the customer
Finance Charge 18% or more per year (1 ½% per
month)
Purchases on credit cards could equal overspending
No cash has been transferred – don’t realize the
amount
if in debt that is so high - bankruptcy
http://www.youtube.com/watch?v=7U6pmk
TC8i0
Credit Card Debt - A Student's Story
TYPES & SOURCES OF CREDIT
Open-End Credit
Borrower can use credit up to a stated limit
Credit can be used again & again as long as
balance owed doesn’t exceed the credit limit
Charge Cards
An agreement made to pay the balance in full owed
each month
Usually 25-day billing period
Visa, Master Card, Discover, American Express
Nationwide and overseas
Rewards or rebates based on purchases made
DECIPHER CREDIT CARDS WITH
THE SCHUMER BOX
Review this reference sheet:
Decipher Credit Card Offers With the Schume
r Box
While ALL the information in a Schumer Box
is important, which items do you think
matter most on a day-to-day basis? (Add this
to your notes)
UNDERSTAND YOUR CREDIT
AGREEMENT
Follow the directions on the worksheet to
complete this activity.
Schumar box worksheet 1
TYPES & SOURCES OF CREDIT
Revolving Accounts
Borrower has option each month to pay balance in
full or make monthly payments
Most All-purpose cards are:
Visa, Mastercard, Discover, gasoline cards, and store
cards
TYPES & SOURCES OF CREDIT
Credit Card Agreements
Annual Percentage Rate (APR) – cost of credit
expressed as a yearly percentage. Can be variable
rate
Truth-in-Lending Law – will discuss later
Credit Utilization
Paying bill on time
Fee if over credit limit
Grace Period
Time frame to pay current bill in full
incur no interest charges
Usually 25 days
Annual Fees
Fee charged annually range from $15+ is paid
whether you use the card or not.
TYPES & SOURCES OF CREDIT
Credit Card Agreements
Transaction Fee
3% to 10% maybe be charged if use a credit card check,
pay by phone or request a balance transfer
Penalty Fee
If go over credit limit or make your payment late
$25 to $50 is a flat rate
Finance Charge
A percentage charged monthly for purchases that were
not paid for. To calculate that use either of the
following formulas:
Credit Card Interest Calculations
1. Change Annual Percentage rate into a decimal
APR 24% = .24 Annual rate
2. Convert ANNUAL rate into a DAILY rate
APR .24 is turned into .24/365 = .0007 daily rate
(let’s round to the 4th place)
3. Multiply daily rate * existing balance = daily interest
4. Daily interest * # of days in a month = monthly
interest
CREDIT CARD INTEREST CALCULATIONS- WHITEBOARD
PRACTICE
1. You have a $3,500 credit card balance
2. Your APR is 29%
3. What is your monthly interest – assume 31 days in
the month? Show your work!
MINIMUM CREDIT CARD PAYMENTS
How long does it take to payoff a credit card?
Minimum Payment Worksheet
MINIMUM PAYMENT WORKSHEET
ANSWERS
CREDIT CARD PAYMENT REVIEW
Part two purchasing a computer.
CREDIT CARD DEBT EXPLAINED
https://www.youtube.com/watch?v=L5qlbISOA
GA
How can you avoid paying interest on your
credit card?
Explain what happens if you make the
minimum payment every month.
How does the credit card companies'
definition of a deadbeat compare to the
traditional meaning?
IT COSTS WHAT?! - CASE FILES
Read the case files and answer the online
questions to solve this interactive case.
http://www.thirteen.org/finance/games/itc
ostswhat_casefiles.html
Answers:
Kevin, who paid a total of $360.28
Emma, who paid a total of $714.86
Maria, who paid a total of $350.00
Byron, who paid a total of $514.24
SHOPPING WITH INTEREST
Socrative Review:
WHY WE SPEND MORE WHEN WE
PAY WITH CREDIT CARDS
Read: http://
www.wisebread.com/why-we-spend-more-w
hen-we-pay-with-credit-cards
In your own words, write in your notebook
two reasons we tend to spend more with
credit than with cash.
Be prepared to be called on.
HOW DO WE KEEP CREDIT CARD
SPENDING IN CHECK?
Use your credit card only for fixed
expenses.
Always check prices.
Stay within your budget.
Make sure you have the cash for it.
Go on a cash diet.
WHAT IS A BALANCE
TRANSFER?
http://www.creditcardfinder.com.au/what-i
s-a-balance-transfer.html
After watching this video, give an example of
why someone might want to utilize a balance
transfer offer.
POTENTIAL PROBLEMS OF
BALANCE TRANSFERS
1. The Transferred Balance Is Usually Credited
First
2. The Transferred Balance Is Usually Credited
First
3. Balance Transfer Fees Eat Up Savings From
Transferring
4. Rewards Can Entice You to Spend More
5. Your Credit Score Can Drop
6. Other Fees May Be Lurking
WHY 0% FINANCING FROM
RETAILERS CAN BE A BAD DEAL
Interest postponed isn't necessarily interest
denied
It could hurt your credit
2 balances can add complications
Missing payments will stop the 0% interest
period
PERSONAL FINANCE 101: WHAT
IS A CASH ADVANCE?
http://www.thesimpledollar.com/what-is-a-
cash-advance/
After reading this article, in your notebook
write down the 3 reasons why a cash advance
is a costly way of using your credit card.
CREDIT CARD LAWS WEBQUEST
RESEARCH:
Followthe directions on the worksheet to
complete this activity.
You may place the answers in your notebook.
UNDERSTANDING YOUR CREDIT
CARD STATEMENT
UNDERSTANDING YOUR CREDIT
CARD STATEMENT
http://www.mycreditunion.gov/Pages/pocket-cents-u
nderstanding-credit-card-statement.aspx
Learn about credit card statements by hovering over
each orange dot.
Once you understand the statement, be prepared to
answer the questions on Socrative.
UNDERSTANDING YOUR CREDIT
CARD STATEMENT
1. How large a payment must this customer make on 4/20/12 to be considered
on-time with their payment?
2. If the customer wants to avoid paying interest, how much should she send by
4/20/12?
3. What is this customer’s interest rate, going forward?
4. What types of fees are included on this customer’s credit card statement for
the month?
5. How much did this customer pay last month?
6. If you could offer this customer just ONE piece of advice, what would you
choose?
RECAP: TYPES & SOURCES OF CREDIT
Service Credit
Providing service for which will paid for later –
Utility Bills, Telephone, Cell Phone
Some businesses may extend service credit
Doctors, lawyers, repair shops, hospitals, dentists
Retail Stores
Some stores offer their own credit cards
Store Benefits
Additional percentage discount, advance
notification of sales
RECAP: SOURCES OF CREDIT
Credit Card Companies
Offers from Visa, Master Card, Discover, etc.
Affinity cards (professional organizations, college
alumni, etc.)
AAA Visa, Walmart Visa
Cash Advance
ability to borrow cash against your credit card
Use an ATM, or writing a check
Higher interest rate and transaction fee (immediate)
Interest accruals immediately
Transfer Funds
Teaser rates – limited time
Transfer Fees
Full payment by end – back interest is added to charge
