1. Credit is Interesting!

2. Credit Cards
They’re so pretty, and they’re so convenient, but credit cards are hardly that simple. They can actually get you into deep trouble if you don’t know your way around them, so here are some basics to get you started.

3. So what is a credit card?
People all over the world use them every day to buy everything under the sun. But where does all that money come from? Well, it’s pretty simple. Credit cards are a way for people to borrow money from a bank or other financial organization. When you’re “approved” for a credit card, it means a bank is willing to lend you some money. Remember: A credit card is a license to borrow money from a bank or other financial organization.

4. Types of Credit?
Loans- A large amount of money borrowed from the bank to purchase a car, house, pay off debt, open a small business
Retail Credit Cards- Retailers offer this credit to their customers
and purchases can only be made within their place of business.
Major Credit Cards- (Visa, Mastercard, Discover) These cards are issued by banks and you can use them any place that accepts major credit cards or for purchases online

5. Free Money?
Every time a customer uses a credit card, they're borrowing money from a bank in order to pay for a purchase. At the end of each month, the customer gets a statement from the bank listing everything he or she purchased with the credit card, along with the total debt owed to the bank. If a customer pays back all the money owed for that month (the balance), that's it! Easy! But wait a second. If the customer DOESN'T pay back all the money owed, the bank starts charging interest on the debt. "Interest" is an extra amount that must be paid on top of the original debt. Remember: Interest is the cost of borrowing money. It is an extra amount that must be paid in addition to the original amount borrowed.

6. Why do banks lend out so much money?
Mostly, because it makes them more money... you don't think they would give it out for free, do you? Using a credit card can be convenient, but it can also cause problems. It is very easy to buy items using a credit card, even if you don't have enough cash on hand to cover the purchase. You can buy a trip to Hawaii and not have to worry about the price tag until later. But ultimately, you will have to pay for the purchases you make, along with the interest on those purchases. Unfortunately, many people use credit cards to buy things they cannot otherwise afford, and create mountains of debt. Remember: Any charges you make to a credit card must eventually be repaid. Watch out for credit card debt!

7. So... are credit cards a bad thing?
Not always. They're great for emergencies, or for large purchases where paying cash may not make sense. Also, it's important to establish a track record of responsible credit card management. Your credit history, and the credit rating (or score) associated with it, is information that banks will consider when you try to buy or rent a home, buy a car, apply for student loans. . .possibly even when you apply for a job. By consistently using a credit card wisely, you can create a favorable financial situation for yourself for years to come. Remember: Credit cards aren't necessarily bad, and good credit card management can actually help you in the long run!

8. Credit Card advantages
Credit cards offer protection against theft of your cash.
You can buy items and services you need when you need them, even if you don’t have enough cash for them.
Credit cards can be lifesavers, and your parents may want you to carry a credit card to pay for gas, repairs, emergency phone calls, etc.
Managing your credit cards well can build up a solid credit history for the future.
If you can use credit responsibly, you’ll end up a smarter money manager

9. Credit Card Disadvantages
Credit cards make it very easy to buy things that are out of your league, to the point where you can’t pay the bill when it comes due.
When you carry a credit card, it’s tempting to buy on impulse and forget you’re actually spending money, or that you’re spending future income that you don’t have (and may never have!).
If you only pay the minimum balance each month, it will take years to pay off the balance, and accumulating interest on that balance can make what you bought cost much, much more in the long run.
If you fall behind on paying your credit card bills, it can damage your credit rating and make it harder for you to get loans in the future.

10. When choosing a credit card you should:
Look for a low interest rate but remember that the interest rate is not fixed; it may change in the future.
Look at how they calculate finance charges.
Look at all charges and costs. Some companies will add other fees, such as late payment fees if your payment arrives after the due date, or transaction fees every time you use the card.
Look at grace periods, and try to choose a card that starts the grace period on the day the purchase is posted to your account, not on the actual day of purchase.
Keep an eye out for extra services and features available. Many cards offer extended warranties, insurance, and rebates. These are great as long as you will use them and won’t cost you extra.
Read each credit contract carefully, be sure you understand all the terms, costs and conditions. The credit card company will give you a credit limit, but don’t pay attention to that! Look at your own finances and decide what you can handle as a limit. As your credit history with a card increases, the company will likely increase your credit limit. This should still not affect the way in which you use the card.

11. How is a credit card different than a debit card
A credit card allows you to purchase items now & pay later with interest. A debit card allows you to purchase items now & requires you to pay now taking the money from your checking account.

12. Some terms to know
Annual Fee: This is basically a membership fee for having this credit card account. It will range from 0 (no annual fee) to upwards of $50.
Annual Percentage Rate (APR): The interest rate, expressed per year, applied to your purchases.
Credit limit- The total amount that can be charged to a credit card without penalty
Debt- Owing money

13. What happens when you buy something using a credit card?
A. You are taking money from your savings account to pay for the item. B. You are getting the item and freeing yourself from full repayment. C. You are taking a temporary loan from a bank, which must ultimately be repaid. D. You are investing in a financial organization, from which you may get profits.

14. What is interest?
A. A penalty for making late credit card payments. B. A charge for borrowing money, generally calculated as a percentage of the amount borrowed. C. A reward for making credit card payments on time. D. A written agreement describing the terms of use for a credit card.

15. What could lead you to end up with unmanageable credit card debt?
A. Buying things you cannot afford. B. Carrying a large balance for a long period of time. C. Losing track of purchases and payments. D. All of the above.

16. How can credit cards be helpful?
A. They are convenient, they free you from carrying around large amounts of cash, and using them wisely can help you establish a strong financial track record. B. They can be used to purchase items you cannot afford, give you extra spending money, and enable you to borrow money you don't have to repay. C. They weigh less than cash, are a status symbol, and give you five years to repay any purchases you make with them. D. They are tied into your checking account, can be used for necessities, and if you lose them, you don't have to pay back any money you owe on them.

17. What is a credit history?
A. A form the bank asks you to complete when you open a savings account. B. The record of purchases and payments to a credit card during a one-month period. C. A statement sent to you each year by the Internal Revenue Service. D. A profile or report of a person's debt and repayment habits, which is built up over the course of several years.

18. Why is it important to establish a good credit rating?
A. A good credit rating enables you to buy things online. B. A good credit rating can earn you college scholarships and tuition waivers. C. A good credit rating can impact your ability to secure future loans, obtain housing, or get a job. D. A good credit rating will give you more money for your retirement income.

19. PSA- Getting the most from your credit card (5 tips)

20. Looking at a statement
Click on Understand your Statement for the PDF file