credit statistics average college student has 4.25 credit cards college seniors graduated with an...
TRANSCRIPT
Credit statistics
Average college student has 4.25 credit cardsCollege seniors graduated with an average credit card debt
of more than $4,100.Close to one-fifth of seniors carried balances greater than
$7,000.Americans spend more than $1 trillion in credit every yearIn the last 12 months, 15 percent of American adults, or
nearly 34 million people, have been late making a credit card payment
8 percent (18 million people) have missed a payment entirely.One in 6 families with credit cards pays only the minimum
due every month.Only 45% of teens know how to use a credit card,Just 26% understand credit card interest and fees.
Image source: http://www.kokogiak.com/megapenny/thirteen.asp
Lesson 1
Credit
Credit- When a financial institution lends an individual money and trusts he or she will pay it back
Used to purchase items now and pay for them later
LenderPerson or organization with the resources to provide a
loan
BorrowerReceives money from the lender; pays it back with
interest or feesLesson 1
Credit
Credit is a source of revenue for financial institutions
Credit is not more money: it is tomorrow’s money
Why Do You Need Credit
Usually, you do not have the necessary amount of money in cash or in a bank account to pay for something, so credit helps you with the following…
5C’s: Qualifying for credit
In order to get credit, you need to QUALIFY for it1. Character
Are you honest? Will you repay?
2. Capital How much money are you worth?
3. Capacity Can you repay? Do you have a job?
4. Collateral What can the lender take away from you if you don’t pay?
5. Conditions What is the health of the economy?
Lesson 1
2.4.1.G1
© Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 6
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Take Charge of Credit Cards
Lesson 2
2.4.1.G1
© Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 7
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
What is a Credit Card?
• Pre-approved credit– A financial institution determines
that they can lend you X dollars, and they believe you will be able to pay it back.
– Banks give them out!– http://www.dailymarkets.com/best-credit
-cards-2014/
Lesson 2
2.4.1.G1
© Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 8
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Credit Card Terms
• Credit card: pre – approved credit.• Interest- Fee for borrowed money• Credit Line/Limit – Highest amount of
money that can be charged to a credit card• Annual Percentage Rate (APR)- Interest
rate charged to the cardholder on the amount borrowed
• Finance Charge – Possible charges assessed to an account for credit card use
Lesson 2
2.4.1.G1
© Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 9
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Credit Card Terms Continued
• Annual Fees - Fee charged once per year for credit card ownership
• Minimum Payment – Smallest payment that can be made on a credit card bill
• Due Date – Date payment is due• Late Payment Fee - Fee charged
when a cardholder does not make the minimum monthly payment by the due date
Lesson 2
2.4.1.G1
© Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 10
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Advantages
– Convenient– Useful for emergencies– Often required to hold a
reservation– Purchase expensive items
earlier– Eliminate the need to carry
around large amounts of cash
Brainstorm 3 advantages of using a credit card
Lesson 2
2.4.1.G1
© Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 11
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Disadvantages
– Paying interest– Additional fees are common– Tempting to overspend– Responsible for lost/stolen
cards– Identity theft is easier– Can cause large amounts of
debt
Brainstorm 3 disadvantages of using a credit card
Lesson 2
© Family Economics & Financial Education –Updated April 2009– Credit Unit – Understanding a Credit CardFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Interest• The price of borrowing money to make a
purchase and paying it later• Interest is referred to as the annual percentage
rate (APR)• Interest rate is charged per dollar borrowed per
year• Credit is often compounding interest which is
interest added upon interest each month based upon the amount charged
• The interest rate varies greatly between credit cards
Lesson 3
© Family Economics & Financial Education –Updated April 2009– Credit Unit – Understanding a Credit CardFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
APR
Type of card Average APR*
National average 14.17%
Cards with a low APR 12.04%
Cards designed for students 13.87%
Cards with airline or hotel rewards
14.43%
Cards for people with bad credit 19.50%* Source: 5/19/10 CreditCards.com Weekly Credit Card Rate Report
Lesson 3
2.4.1.G1
© Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 14
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Safety Tips
1. Shred any unwanted credit card offers or credit cards received in the mail
2. Always check your credit card statement to make sure there are no false purchases
3. Sign card with signature and “Please See ID”
4. Do not leave cards lying around5. Close unused accounts in writing and
by phone, then cut up the card
Lesson 2
2.4.1.G1
© Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 15
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Safety Tips continued
6. Do not give out account number unless making secure purchases
7. Keep a list of all cards, their account numbers, and phone numbers separate from cards
8. Report lost or stolen cards promptly
Lesson 2
2.4.1.G1
© Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 16
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Remember….
• Only use a credit card when there is no doubt about ability to pay off the charges at the end of the month
Lesson 2
2.4.1.G1
© Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 17
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
What is a Debit Card?
• Plastic card that looks like a credit card• Electronically connected to your bank
account• Money is automatically taken from your
bank account when purchases are made• Requires a PIN (personal identification
number)– Confirms the user is authorized to access
the account
Lesson 2