Credit CardsAn Introduction “Hi! Nice to meet you!”

Some questions What does it mean to take “personal responsibility” for

something? Give an example of a situation where you have taken responsibility for making sure something got done.

Have you ever borrowed money from someone? What agreement did you make with them about paying the money back? Did you?

Have you ever given a loan to someone? What was the agreement? Did you get it in writing?

Why might someone want to make a purchase with a credit card instead of buying it with cash?

Credit Ability of a person or business to

borrow money from a lender with the promise to pay it back

Earning credit requires trust

Credit History Determines whether you can borrow

money from a bank (a loan) for a house, car, etc.

Shows whether you are responsible in making payments overtime

Follows you your whole life – you want good credit history

How to get a credit card…

You can apply for a credit card when you’re 18 years old

1) The lender will first want to know what your income is

2) They’ll want to know your history of paying bills ontime.

If they approve of all of these things, you will get a credit card!

Interest The fee lenders charge for lending you

money

Expressed as Annual Percentage Rate (APR) which is the percentage interest charged on the loan over a year

If you pay off your loan every month, you do not have to pay interest

You usually want to shop for a credit card with a low interest rate

Credit Card Limit The max amount you can charge to your

credit card (set by the lender)

Annual Fee Some credit cards charge an annual fee

and are usually associated with some sort of bonus (eg. travel points, rewards, etc.)

If you don’t pay the annual fee on time you will be charged a late fee

Bad Credit Happens when you don’t make a

payment, or you make a late payment

May be charged a late fee or a higher interest rate as a penalty

Bottom Line…IT’S IMPORTANT TO KNOW THE INS AND

OUTS OF YOUR CREDIT CARD!!!

Ex. 1You charge $100 on a credit card that has a limit of $300. The card has an annual interest rate of 18%. Estimate how long it will take you to pay off the total charge if you pay $20 a month.

Ex.2At 18% a year, what will the interest be on the unpaid $80 balance at the end of the first month?

Ex. 3On the $100 charge, how much will your outstanding balance be at the end of the first month, if you only make a payment of $5?

Ex. 4How are balances determined?