Chapter 7 – Credit Card Math

What is a Credit Card? A credit card is a card with a magnetic strip. Many people carry these cards in their wallets or purses..

People with a valid card have the authorization to purchase goods and services from stores and other businesses. Whey they use the credit card they can charge up to a limited amount. *This amount is called a credit limit.

Once the card is used, the cardholder repays the bank by making regular monthly payments. It is important to remember that If the entire balance is not paid in full, the bank or credit card company can legally charge interest fees on the unpaid portion

What is a Monthly Billing Statement? A monthly statement is a personalized financial record. This sheet of paper tells the card holder about the status of his or her account. It is generally mailed to you on or near the same day each month. There are many different types of monthly statements. These tell you how much you owe.

A monthly credit card statement lists what debt has accumulated on a particular credit card. In the case of a running balance, the monthly statement allows the customer to see the previous month's balance, and any credits applied since. Charges are also listed, along with the current payment due and the due date.

Credit Card Statement

Reading a statement What is the due date for this bill? Where will you send the check to pay the bill? What is the new balance? Where will you write the amount you are paying? How much did you pay the last time? What is the finance charge? What is the credit limit? How much credit is available? How much is due now? Where is the Account Number?

Reading a Monthly Statement Account Information Payment Information Contact Information Account Activity Balance Summary Finance Charge http://www.nyc.gov/html/ofe/html/help/statement.shtml

Parts of a billing statement Account Information Account number Name Billing period Statement date Payment Information Payment due date Contact Information Send to Who to contact with questions Account Activity Balance Summary Finance Charges

Can you locate the important information on a statement? Let’s Practice Together! Can you locate the important information on a statement? Also see page 143 in our text book. http://www.gcflearnfree.org/everydaylife/paybills

Choosing a credit card Each credit card agreement has these parts to it. The card company has to tell you about each of these on the credit card offer – but you have to read the small print on all the pages of the offer to find out what they are. Annual fee – many cards have a fee that you pay whether you use the card or not Interest rate – the card’s interest rate is called an APR (annual percentage rate). Be careful about cards that have 0% interest or “low introductory rates.” Usually, these rates go up in 3 or 6 months. Also, there is often a higher interest rate for cash advances than for purchases. Grace period and late fees - A grace period is usually 20 – 25 days you have to pay the bill before it is due. If you do not pay the bill by the due date, there will be a late fee (usually from $15 to $40). You may pay higher late fees if you have a big balance or if you have made late payments in the past. If the payment is late a lot of times, it will hurt your credit rating. Note that some cards do not give a grace period. These cards charge monthly interest even if you pay the full balance every month. Over limit fees – If your unpaid balance and new charges go over your credit limit, you will be charged an “over limit” fee (usually about $30). You can visit another website to take a quiz to see what type of card you should look for. A secured credit card can be a good stepping stone to a regular credit card. Click here for questions to ask about these types of cards.

For a checking account, a monthly statement will show the current balance in the account as of the statement date. The customer can check to see that all charges against the account are accurate, and that all deposits or credits that have occurred since the previous month's statement have been applied. If the account is overdrawn, this will also show on the statement.