1. AGENDA AND LEARNING OBJECTIVES: Agenda:  Review questions  “May Favorite No”  Credit Card Agreements Learning Objectives:  List and describe the types of credit available to customers  Identify parts of credit card agreements

2. REVIEW: 1. Math problem: 1. Katniss has a monthly net income of $3,600. Her fixed expenses are $750 for rent. While attending Capital University, she pays a credit card loan of $800 every month and she is paying off a set of new arrows for $400 she bought last month. What is Katniss’s safe debt load? Can she take on more debt? If yes, how much?

3. REVIEW CONTINUED: 1. What are the three different types of credit? Define each one. 2. What is a charge card? What is a revolving account? How are they similar? 3. Provide some examples of what you might buy with a closed-end credit account. 4. Describe the concept of service credit and provide an example.

4. CREDIT CARD AGREEMENTS INDEPENDENT LIVING DECEMBER 10, 2015

5. WHAT THEY HAVE TO DO:  Companies are required by law to record transactions on your account and send you a bill at the end of the billing cycle  Pay the bill in full at the end of the cycle, you avoid finance charges  Before selecting a credit card, be sure to review the following terms which affects the overall cost of the credit you will be using

6. ANNUAL PERCENTAGE RATES (APR):  The cost of credit expressed as a yearly percentage  Truth in Lending Act:  Lenders to include all loan costs in the APR  APR must be disclosed when you open the account  APR must be noted on every monthly bill you receive  APR can be a variable rate and very high on credit cards  Lower when first opened (introductory rate) and rise after end of first year

7. GRACE PERIOD:  A time-frame within which you may pay your current balance in full and incur no finance charge  Runs from end of billing cycle to next payment due date  Usually 10-15 days  Credit Card Act of 2009:  If balance has an allotted grace period, statement must be mailed or delivered at least 21 days before the finance charge would be added to your balance  If no grace period is stated in agreement, creditor can/will impose a finance charge from the date you use your card

8. CREDIT CARD AGREEMENTS INDEPENDENT LIVING DECEMBER 14, 2015

9. REVIEW: 1. Math problem: 1. Sarah has a monthly net income of $2,750. Her fixed expenses are $750 for rent. Currently, she pays a credit card loan of $150 every month and she is paying off a dish set for $100 she bought last month. What is the largest monthly payment that Sarah can afford and still be able to stay within her safe debt load of 20%.

10. REVIEW CONTINUED: 1. Name one thing that credit card companies are required to do for their customers. 2. What does APR stand for? 3. What are the three APR items that are discussed in the Truth in Lending Act? 4. Are APR’s fixed or variable rates? 5. What does the Credit Card Act of 2009 state in regards to grace periods?

11. ANNUAL FEES:  Creditors can charge an annual fee for your open account  Fee can range from $40 to $100 +  Can either be one-time charge or can be divided into months throughout the year  Most cards with fees offer better/different rewards and incentives

12. TRANSACTION FEES:  Charged to numerous items like:  Pay by phone (hotel reservations, gym memberships, etc.)  Balance transfer  Transaction fee can be anywhere between 3 – 10 percent of transaction amount

13. PENALTY FEES:  Go over limit… Penalty fee will be charged  Credit Card Act of 2009  Penalty fees are capped to prevent excessive charges from being passed onto cardholders  $25/month for most holders  $35/month if late fee is charged more then once in sixth month window  Cannot be any bigger than minimum payment

14. METHOD OF CALCULATING THE FINANCE CHARGE:  Important to know how the card issuer will calculate your finance charge  Different forms of finance charges  Type 1:  Type 2: