news/video-credit-card-basics-1264.php news/video-credit-card-basics-1264.php Credit - derived from Latin “credo” meaning “I believe ”

Credit- when good or service is received in exchange for a promise to pay a definite sum of money at a future date Lender- Person or Organization that provides the loan. Bank, Credit Borrower- Person who get the money on as a loan Creditworthiness- ability and willingness to pay money back Principal- The amount of money you borrow ($1,000) Interest- The price a lender charges you to borrow money (20%)

Closed Ended Credit- Borrower must repay in specified number of payments. 5 years for a car, 30 years for house Agreement between borrower and lender with terms that end after principal is repaid Installment credit (closed ended)- # of payments (5 years 60 months) + Interest (APR or rate) Examples of closed ended credit- College Loans, Auto, Home Can extra pay off principal to cut years off by paying extra payments

Principal Total amount to pay back with interest Interest over 10 years

Revolving Credit (Open Ended)- extended as a line of credit in advance so borrower doesn’t have to apply for credit each time it is desired Can be repaid in one month or over many Borrower chooses how much to repay each month Minimum payment- lender requests a small fee per month Unpaid balance is revolved into next month

Credit application- complete application What do they look at? Earnings, Savings, Job, Credit Worthiness Pre-approved- you passed initial check but doesn’t mean anything Credit Investigation- lenders compare your information and study your credit history Denial- You can be denied based on your credit history after investigation

Must be: 18 years old, show income or have co-signer Raise APR only after 60 days Statement must be sent 21 days prior to due date Due Dates always the same Cardholder must be notified of changes

Limits your liability to $50 for unauthorized use of your card. Must submit within 60 days of unauthorized use If card number is used but not card individual is protected fully. Card must be reported or can cost $50

Sign your credit card - Please see ID People that work register will ask for a photo ID to prove it is you Do Not use unwanted or unused cards- if you lose wallet thief can use Never give out credit number unless purchasing something Report lost or stolen immediately Shred unwanted pre-approvals - people can steal garbage

PaymentLength Total Interest paid Total Amount paid Full Payment $ month $0$1,500 Partial$135 1 year $125$1,625 Minimum$30 11 years $1,413$2,913 Sample $1,500 purchase on revolving Credit

18-24 yr. olds spend 30% of their income on debt repayment. Avg. Student loan $32,000 Avg. House in U.S. has $15,607 in credit card debt In the U.S. More people file for bankruptcy than graduate from college. I have seen this first hand, I have friends and family that are having a tough time at 30 yrs old.

Avg. college loans is over $32,000 Avg. Mortgage- $168,000 Friends have 80,000 in debt- they pay more than my house payment in college loans, 6% interest on Stafford Loan (10 years) Debt rose 6%, salaries only rose 3% for graduates

Interest Rate- Is charge to borrow the money known as (APR) Annual Percentage Rate Very High for Credit Cards 20% and going up, some all the way up to 30% National Average is 14.9% 24% means 2% per month for each purchase that you don’t pay off- for annual % of 24.

APR - only matters if you do not pay off your balance I.E. - Charge 2,000 and pay it off before due date- no APR is ever assessed, no charges to you I.E.- Charge 2,000 and pay off $50. The $1950 will be charged at your APR. 24% APR will put 2% on at end of month due to 24% Annual Percentage/12 months=2% every month or 24% for the year.

1. Knowing Your Limit 2. Don’t get in over your head. 3. A credit card is a loan Anything not paid back in full is assessed an interest charge. Anything not paid back in full is assessed an interest charge. 4. There’s a pre-determined credit limit and money spent can be paid back in full or in installments. 4. There’s a pre-determined credit limit and money spent can be paid back in full or in installments.

Advantages 1. Convenient 2. Emergencies useful 3 Required for reservations 4. Big purchases can be spread out 5. Positive credit rating 6. Bonuses and Rewards 7. Immediate purchasing power 8. No need for cash 9. Bills can be consolidated 10. Zero liability on fraud