HOW CREDIT CARDS WORK

INTRODUCTION The majority of Canadian have at least

one, and possibly multiple credit cards.

INTRODUCTION Credit cards originated in the USA in the

1920s. Individual companies offered them to

people making purchases from those businesses.

Their use increased dramatically after WWII.

First universal credit card established in 1950.

BENEFITS OF CREDIT CARDS Major source of identification. Convenient

CREDIT CARD SAFETY Sign your card – as soon as your receive

it. Enter your PIN in such a way that no one

can easily memorize it. Don’t leave your receipts behind

personal information on them may be taken.

Always shred credit card statements before recycling.

CREDIT CARD SAFETY Avoid giving your credit card number

over the phone. Ensure you get your card back after you

make a purchase. Write “See ID” on the back of your card.

This will trigger the merchant to ask for your ID.

CREDIT CARD APPLICATIONS Annual Fee – a flat, yearly charge

Many companies offer “no annual fee” cards.

Some cards with fees will also come with benefits.

Grace Period – a time period, usually about 25 days, in which you can pay off your balance with out interest.

CREDIT CARD APPLICATION Annual Percentage Rate (APR) – the

yearly rate of the finance charge.Fixed Rate – does not changeVariable Rate – prime rate (which varies)

plus added percentage. Introductory Rate – a temporary, lower APR

that usually lasts for about six months before converting to the normal fixed or variable rate.

MONTHLY PAYMENTS Visa and MasterCard offer revolving

credit.They allow you to carry a balance, on which

they charge interest.They require you to make a minimum

payment.The minimum payment is usually 5% of

your current balance.

MONTHLY PAYMENTS High-rate card – 23.99%

You spend $1000. You make only the minimum payments,

starting at $51.You will make 77 payments, and will have

paid $573.59 Low-rate card – 9.9%

You spend $1000. You make only the minimum payments,

starting at $50.41You will make 17 fewer payments, and will

have paid only $176 in interest.

QUALIFYING FOR CREDIT Good Payment Record

Pay bills on timeLate payments can hurt your chances, or

raise your interest rate.