Credit Cards Know what you’re getting into…

Pros  Convenient  Easy to Track  Consumer Protection  Special Services  Rewards (Points/Miles/Credits at Retailers/Cash Back)  Can be Required (Reserve Hotels/Buying Online)  Can be Used in Emergencies  Internationally Accepted

Cons  Security  Penalties  Easier to Spend  Low Minimum Payments = Long Term Debt  Annual Fees  High Penalty APR’s  Highest Interest Rate Debt

Basics  Grace Period  Annual Fee  Introductory APR  Balance Transfer APR  Purchase APR  Cash Advance APR  Penalty APR  Over Limit Fee  Late Payment Fee  Credit Limit

How Interest Is Calculated  Average Daily Balance Balance each day x number of days ÷ days in the cycle Beginning Balance $1,000 Purchase Tires for $500 on the 15 th Pay $200 on the 20 th Billing cycle November days x $1,000 = 15,000 5 days x $1,500 = 7, days x $1,300 = 13,000 Total $35,500 ÷ 30 days in cycle = average daily balance of $1,183.33

 Previous Balance Balance at the beginning of the month x monthly interest rate Beginning Balance $1,000 Purchase Tires for $500 on the 15 th Pay $200 on the 20 th Billing cycle November 1-30 Previous Balance $1,000 How Interest Is Calculated

 Adjusted Balance Balance at the beginning of the month + purchases - payments x monthly interest rate Beginning Balance $1,000 Purchase Tires for $500 on the 15 th Pay $200 on the 20 th Billing cycle November 1-30 Adjusted Balance = $1, – 200 = $1,300 How Interest Is Calculated

How do they compare?  All the same terms EXCEPT interest calculation method. 18% APR credit card.  Average Daily Balance: $1, x 1.5% = $17.75  Previous Balance Method: $1,000 x 1.5% = $15.00  Adjusted Balance Method: $1,300 x 1.5% = $19.50