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TRANSCRIPT
7.4.2.G1
Understanding Your Credit Card
Essentials Advanced Level
The Essentials to Take Charge of Your Finances
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 2 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
What is Credit?
Why would a person want to use credit? Brainstorm!
Credit- when goods, services or money is received in
exchange for a promise to pay a definite sum of money
at a future date
Credit is derived from the Latin word “credo”
meaning “I believe”
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 3 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Obtaining Credit
Borrower (person or organization that is
receiving the money) is in need of credit
Borrower requests to receive credit from a lender (person or
organization who has the resources to provide the borrower money)
Lender determines whether to grant the
borrower credit based on the borrower’s perceived
creditworthiness (an individuals ability and willingness to pay the
money back)
Why would a lender assess a borrower’s creditworthiness before granting credit?
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 4 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Paying Back Credit
If approved for credit, the borrower will receive money
from the lender
Why would a lender charge a borrower interest?
Borrower is usually expected to pay
interest (the price of money) in
addition to the money borrowed
Depending on the type of credit,
money is paid back in a series of equal
or unequal payments
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 5 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
What is a Credit Card?
Pre-approved credit which can be used for the purchase of goods and services now and payment of them later
A credit cards credit limit varies based upon the cardholder’s perceived creditworthiness
Cardholders may continue to borrow as long as the credit limit (maximum dollar amount loaned) is not exceeded
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 6 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Credit Card Interest
Interest is charged each month the balance is not paid in full
The cost of credit expressed as a yearly interest rate
Rate at which interest is charged is referred to as:
Annual Percentage Rate
(APR)
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 7 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Minimum Payments
• Required to make at least a minimum payment each month – Usually only a small percentage (2.5-5%) of the total
balance due
• Cardholders who only make the minimum payment: – Make slow progress paying off card balance – Pay substantially more than what was initially charged to
the card
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 8 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Minimum Payments
Amount charged to
credit card in one purchase
APR Minimum payment
Time to pay off the credit
card
Total amount paid in interest
Total amount paid
$2,000 18% $50.00 62 months $1,077.25 $3,077.25
$500 12% $25.00 23 months $60.67 $560.67
What are the advantages and disadvantages of using a credit card?
Brainstorm!
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 9 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Advantages & Disadvantages to using
Credit Cards
• Convenient payment tool • Useful for emergencies • Often required to hold a
reservation • Able to purchase “big ticket”
items and spread out payments • Protection against fraud • Opportunity to establish a
positive credit history • Online shopping is safer than
using a debit card • Possibility of receiving bonuses
• Interest can be costly when a balance is revolved
• Additional penalty fees may apply
• Tempting to overspend • Risk of identity theft • Responsible for lost/stolen
cards • Applying for multiple accounts
in a short period of time can lower your credit score
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Debit Cards
• What is a debit card? – A plastic card which looks like a credit card, but is
electronically connected to the cardholder’s bank account
– Money is immediately withdrawn from the cardholders checking account
What is the difference between a credit card and a debit card?
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Creditworthiness
Credit card approval depends on the
borrower’s perceived creditworthiness according to the
lender
Lenders assess an individual’s
creditworthiness based upon their
credit report and/or credit score
How a person uses a credit card affects
their creditworthiness
Creditworthiness
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 12 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Credit History
Credit Report A record of a consumer’s credit history that includes information about credit card use as well as the use of other types of credit, such as auto
loans, student loans and mortgage loans
A number that summarizes an individual’s credit record and history. It is a numeric “grade” of a consumer’s financial reliability
Credit Score
Credit cards can have a positive or negative impact on an individuals credit history
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 13 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Positive Credit Card Use
Proper credit card use
Helps develop positive credit history and credit report
Earn a high credit score
A high credit score gives the consumer the opportunity to have lower interest rates on loans, the privilege to use different forms of
credit, and an easier approval process for future credit
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 14 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Positive Credit Card Use
• Examples of positive credit card behaviors: – Paying credit card balances in full every month – Paying credit card bills on time – Applying for only credit cards that are needed – Keeping track of all charges by keeping receipts and
using a check register – Checking the monthly credit card statement for errors
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 15 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Negative Credit Card Use
Consumers with low credit scores have difficulty getting loans, difficulty renting apartments, pay higher interest rates, pay higher insurance rates, and have difficulty obtaining a job
Improper credit card use
Develops negative credit
history and credit report
Lower credit score
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 16 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Negative Credit Card use
• Examples of negative credit card behaviors: – Making late credit card payments – Paying only the minimum payment – Exceeding the card’s credit limit (usually triggers a
penalty fee) – Charging items that can’t be paid off immediately – Owning too many credit cards
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 17 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
NO Credit
• If an individual has not used credit, they will not have any information in their credit report
• Not having a credit report can cause an individual to be denied credit
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 18 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Credit Card Offers
Credit card issuers are required to disclose the terms and fees of credit cards in an easy to read box format
This is called the Schumer box
Must direct consumers to the Federal Reserve website (http://www.federalreserve.gov/creditcard/ )to obtain more information
about credit cards, including the following sample credit card offer
© Family Economics & Financial Education –July 2010 – The Essentials to Take Charge of Your Finances– Understanding a Credit Card Essentials Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.4.2.G1
Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases
12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate.
APR for Balance Transfers
15.99% • This APR will vary with the market based on the Prime Rate
APR for Cash Advances 21.99% • This APR will vary with the market based on the Prime Rate
Penalty APR and When it Applies
28.99% This APR may be applied to your account if you: 1. Make a late payment; 2. Go over your credit limit; 3. Make a payment that is returned; or 4. Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due.
How to Avoid Paying Interest on Purchases
Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month.
Minimum Interest Charge
If you are charged interest, the charge will be no less than $1.50.
For Credit Card Tips from the Federal Reserve Board
To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard
Fees Set-up and Maintenance Fees
NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209. • Annual Fee: $20 • Account Set-up Fee: $20 (one-time fee) • Participation Fee: $12 annually ($1 per month) • Additional Card Fee: $5 annually (if applicable)
Transaction Fees • Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)
• Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater • Foreign Transaction: 2% of each transaction in U.S. dollars
Penalty Fees • Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000
• Over-the-limit: $29 • Returned Payment: $35
* How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).”
* Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill
Annual Percentage Rate (APR) for Purchases
• Interest rate paid for purchases • Multiple interest rates may be
listed - final interest rate may depend on creditworthiness of the applicant
Credit cards may charge many different types of
interest rates
© Family Economics & Financial Education –July 2010 – The Essentials to Take Charge of Your Finances– Understanding a Credit Card Essentials Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.4.2.G1
Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases
12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate.
APR for Balance Transfers
15.99% • This APR will vary with the market based on the Prime Rate
APR for Cash Advances 21.99% • This APR will vary with the market based on the Prime Rate
Penalty APR and When it Applies
28.99% This APR may be applied to your account if you: 1. Make a late payment; 2. Go over your credit limit; 3. Make a payment that is returned; or 4. Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due.
How to Avoid Paying Interest on Purchases
Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month.
Minimum Interest Charge
If you are charged interest, the charge will be no less than $1.50.
For Credit Card Tips from the Federal Reserve Board
To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard
Fees Set-up and Maintenance Fees
NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209. • Annual Fee: $20 • Account Set-up Fee: $20 (one-time fee) • Participation Fee: $12 annually ($1 per month) • Additional Card Fee: $5 annually (if applicable)
Transaction Fees • Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)
• Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater • Foreign Transaction: 2% of each transaction in U.S. dollars
Penalty Fees • Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000
• Over-the-limit: $29 • Returned Payment: $35
* How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).”
* Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill
Fixed vs. Variable-rate APR • Fixed-rate APR- an APR that
cannot change during the period of time outlined in a credit card agreement
• Variable-rate APR- an APR that may change depending on other factors (such as economic conditions)
What is the APR for Purchases for this credit card offer?
14.99% Is this a variable-rate APR
or a fixed-rate APR? Variable-rate APR
© Family Economics & Financial Education –July 2010 – The Essentials to Take Charge of Your Finances– Understanding a Credit Card Essentials Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.4.2.G1
Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases
12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate.
APR for Balance Transfers
15.99% • This APR will vary with the market based on the Prime Rate
APR for Cash Advances 21.99% • This APR will vary with the market based on the Prime Rate
Penalty APR and When it Applies
28.99% This APR may be applied to your account if you: 1. Make a late payment; 2. Go over your credit limit; 3. Make a payment that is returned; or 4. Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due.
How to Avoid Paying Interest on Purchases
Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month.
Minimum Interest Charge
If you are charged interest, the charge will be no less than $1.50.
For Credit Card Tips from the Federal Reserve Board
To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard
Fees Set-up and Maintenance Fees
NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209. • Annual Fee: $20 • Account Set-up Fee: $20 (one-time fee) • Participation Fee: $12 annually ($1 per month) • Additional Card Fee: $5 annually (if applicable)
Transaction Fees • Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)
• Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater • Foreign Transaction: 2% of each transaction in U.S. dollars
Penalty Fees • Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000
• Over-the-limit: $29 • Returned Payment: $35
* How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).”
* Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill
Introductory Rate • Introductory rate- the APR
that may be charged after a credit card account is opened
• Will have a different APR (usually higher) after the introductory period ends
• Not all credit cards have an introductory rate
What is the introductory rate for this credit card offer?
The introductory rate depends on the creditworthiness of the
applicant, but it will be 12.99%, 13.99%, or 14.99%
© Family Economics & Financial Education –July 2010 – The Essentials to Take Charge of Your Finances– Understanding a Credit Card Essentials Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.4.2.G1
Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases
12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate.
APR for Balance Transfers
15.99% • This APR will vary with the market based on the Prime Rate
APR for Cash Advances 21.99% • This APR will vary with the market based on the Prime Rate
Penalty APR and When it Applies
28.99% This APR may be applied to your account if you: 1. Make a late payment; 2. Go over your credit limit; 3. Make a payment that is returned; or 4. Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due.
How to Avoid Paying Interest on Purchases
Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month.
Minimum Interest Charge
If you are charged interest, the charge will be no less than $1.50.
For Credit Card Tips from the Federal Reserve Board
To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard
Fees Set-up and Maintenance Fees
NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209. • Annual Fee: $20 • Account Set-up Fee: $20 (one-time fee) • Participation Fee: $12 annually ($1 per month) • Additional Card Fee: $5 annually (if applicable)
Transaction Fees • Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)
• Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater • Foreign Transaction: 2% of each transaction in U.S. dollars
Penalty Fees • Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000
• Over-the-limit: $29 • Returned Payment: $35
* How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).”
* Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill
APR for Balance Transfers & Cash Advances
• A balance transfer is the act of transferring debt from one credit card account to another
• A cash advance includes withdrawing cash from an ATM using a credit card
• Balance transfer and cash advance fees may also apply (even if the APR is 0%)
© Family Economics & Financial Education –July 2010 – The Essentials to Take Charge of Your Finances– Understanding a Credit Card Essentials Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.4.2.G1
Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases
12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate.
APR for Balance Transfers
15.99% • This APR will vary with the market based on the Prime Rate
APR for Cash Advances 21.99% • This APR will vary with the market based on the Prime Rate
Penalty APR and When it Applies
28.99% This APR may be applied to your account if you: 1. Make a late payment; 2. Go over your credit limit; 3. Make a payment that is returned; or 4. Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due.
How to Avoid Paying Interest on Purchases
Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month.
Minimum Interest Charge
If you are charged interest, the charge will be no less than $1.50.
For Credit Card Tips from the Federal Reserve Board
To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard
Fees Set-up and Maintenance Fees
NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209. • Annual Fee: $20 • Account Set-up Fee: $20 (one-time fee) • Participation Fee: $12 annually ($1 per month) • Additional Card Fee: $5 annually (if applicable)
Transaction Fees • Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)
• Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater • Foreign Transaction: 2% of each transaction in U.S. dollars
Penalty Fees • Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000
• Over-the-limit: $29 • Returned Payment: $35
* How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).”
* Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill
Penalty APR and When it Applies
Discloses the penalty APR and the penalty terms that trigger the
penalty APR to take effect
• Penalty APR is the interest rate charged on new transactions if the penalty terms in the credit card contract are triggered
What is the Penalty APR for this credit card offer?
21.99%
© Family Economics & Financial Education –July 2010 – The Essentials to Take Charge of Your Finances– Understanding a Credit Card Essentials Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.4.2.G1
Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases
12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate.
APR for Balance Transfers
15.99% • This APR will vary with the market based on the Prime Rate
APR for Cash Advances 21.99% • This APR will vary with the market based on the Prime Rate
Penalty APR and When it Applies
28.99% This APR may be applied to your account if you: 1. Make a late payment; 2. Go over your credit limit; 3. Make a payment that is returned; or 4. Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due.
How to Avoid Paying Interest on Purchases
Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month.
Minimum Interest Charge
If you are charged interest, the charge will be no less than $1.50.
For Credit Card Tips from the Federal Reserve Board
To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard
Fees Set-up and Maintenance Fees
NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209. • Annual Fee: $20 • Account Set-up Fee: $20 (one-time fee) • Participation Fee: $12 annually ($1 per month) • Additional Card Fee: $5 annually (if applicable)
Transaction Fees • Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)
• Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater • Foreign Transaction: 2% of each transaction in U.S. dollars
Penalty Fees • Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000
• Over-the-limit: $29 • Returned Payment: $35
* How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).”
* Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill
How To Avoid Paying Interest on Purchases
• Explains how you can avoid interest charges by paying credit card bills in full every month
Minimum Interest Charge • Typically range from $0.50
to $2 per month
© Family Economics & Financial Education –July 2010 – The Essentials to Take Charge of Your Finances– Understanding a Credit Card Essentials Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.4.2.G1
Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases
12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate.
APR for Balance Transfers
15.99% • This APR will vary with the market based on the Prime Rate
APR for Cash Advances 21.99% • This APR will vary with the market based on the Prime Rate
Penalty APR and When it Applies
28.99% This APR may be applied to your account if you: 1. Make a late payment; 2. Go over your credit limit; 3. Make a payment that is returned; or 4. Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due.
How to Avoid Paying Interest on Purchases
Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month.
Minimum Interest Charge
If you are charged interest, the charge will be no less than $1.50.
For Credit Card Tips from the Federal Reserve Board
To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard
Fees Set-up and Maintenance Fees
NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209. • Annual Fee: $20 • Account Set-up Fee: $20 (one-time fee) • Participation Fee: $12 annually ($1 per month) • Additional Card Fee: $5 annually (if applicable)
Transaction Fees • Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)
• Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater • Foreign Transaction: 2% of each transaction in U.S. dollars
Penalty Fees • Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000
• Over-the-limit: $29 • Returned Payment: $35
* How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).”
* Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill
Set-up and Maintenance Fees • Any set-up and
maintenance fees for the card • Annual fee- a yearly fee
that may be charged for having a credit card
What is the annual fee for this credit card?
$20
Credit cards may charge many different types of
fees
© Family Economics & Financial Education –July 2010 – The Essentials to Take Charge of Your Finances– Understanding a Credit Card Essentials Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.4.2.G1
Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases
12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate.
APR for Balance Transfers
15.99% • This APR will vary with the market based on the Prime Rate
APR for Cash Advances 21.99% • This APR will vary with the market based on the Prime Rate
Penalty APR and When it Applies
28.99% This APR may be applied to your account if you: 1. Make a late payment; 2. Go over your credit limit; 3. Make a payment that is returned; or 4. Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due.
How to Avoid Paying Interest on Purchases
Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month.
Minimum Interest Charge
If you are charged interest, the charge will be no less than $1.50.
For Credit Card Tips from the Federal Reserve Board
To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard
Fees Set-up and Maintenance Fees
NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209. • Annual Fee: $20 • Account Set-up Fee: $20 (one-time fee) • Participation Fee: $12 annually ($1 per month) • Additional Card Fee: $5 annually (if applicable)
Transaction Fees • Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)
• Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater • Foreign Transaction: 2% of each transaction in U.S. dollars
Penalty Fees • Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000
• Over-the-limit: $29 • Returned Payment: $35
* How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).”
* Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill
Transaction Fees • Discloses any transaction
fees for the card • Balance transfer fees • Cash advance fees
• May be charged in addition to APR
© Family Economics & Financial Education –July 2010 – The Essentials to Take Charge of Your Finances– Understanding a Credit Card Essentials Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.4.2.G1
Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases
12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate.
APR for Balance Transfers
15.99% • This APR will vary with the market based on the Prime Rate
APR for Cash Advances 21.99% • This APR will vary with the market based on the Prime Rate
Penalty APR and When it Applies
28.99% This APR may be applied to your account if you: 1. Make a late payment; 2. Go over your credit limit; 3. Make a payment that is returned; or 4. Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due.
How to Avoid Paying Interest on Purchases
Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month.
Minimum Interest Charge
If you are charged interest, the charge will be no less than $1.50.
For Credit Card Tips from the Federal Reserve Board
To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard
Fees Set-up and Maintenance Fees
NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209. • Annual Fee: $20 • Account Set-up Fee: $20 (one-time fee) • Participation Fee: $12 annually ($1 per month) • Additional Card Fee: $5 annually (if applicable)
Transaction Fees • Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)
• Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater • Foreign Transaction: 2% of each transaction in U.S. dollars
Penalty Fees • Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000
• Over-the-limit: $29 • Returned Payment: $35
* How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).”
* Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill
Penalty Fees • Discloses the penalty fees for
the card (in addition to Penalty APR) • Late-payment- charged
when a cardholder does not make the minimum monthly payment by the due date
• Over-the-limit-charged if the account balance goes over the set credit limit
How we calculate your balance • Credit card companies can use
one of several methods to calculate the outstanding balance on a credit card
© Family Economics & Financial Education –July 2010 – The Essentials to Take Charge of Your Finances– Understanding a Credit Card Essentials Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.4.2.G1
Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases
12.99%, 13.99% or 14.99%, introductory APR for one year, based on your creditworthiness. After that, your APR will be 14.99%. This is a variable-rate APR that will vary with the market based on the Prime Rate.
APR for Balance Transfers
15.99% • This APR will vary with the market based on the Prime Rate
APR for Cash Advances 21.99% • This APR will vary with the market based on the Prime Rate
Penalty APR and When it Applies
28.99% This APR may be applied to your account if you: 1. Make a late payment; 2. Go over your credit limit; 3. Make a payment that is returned; or 4. Do any of the above on another account that you have with us. How long will the Penalty APR apply? If your APR’s are increased for any of these reasons, the Penalty APR will apply until you make six consecutive minimum payments when due.
How to Avoid Paying Interest on Purchases
Your due date is at least 25 days after the close of each billing cycle. We will not charge you any interest on purchases if you pay your entire balance by the due date each month.
Minimum Interest Charge
If you are charged interest, the charge will be no less than $1.50.
For Credit Card Tips from the Federal Reserve Board
To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at http://www.federalreserve.gov/creditcard
Fees Set-up and Maintenance Fees
NOTICE: Some of these set-up and maintenance fees will be assessed before you begin using your card and will reduce the amount of credit you initially have available. For example, if you are assigned the minimum credit limit of $250, initial available credit will be only about $209. • Annual Fee: $20 • Account Set-up Fee: $20 (one-time fee) • Participation Fee: $12 annually ($1 per month) • Additional Card Fee: $5 annually (if applicable)
Transaction Fees • Balance Transfer: Either $5 or 3% of the amount of each transfer, whichever is greater (maximum fee: $100)
• Cash Advance: Either $5 or 3% of the amount of each cash advance, whichever is greater • Foreign Transaction: 2% of each transaction in U.S. dollars
Penalty Fees • Late Payment: $29 if balance is less than or equal to $1000 OR $35 if balance is more than $1000
• Over-the-limit: $29 • Returned Payment: $35
* How We Will Calculate Your Balance: We use a method called “average daily balance (including new purchases).”
* Loss of Introductory APR- We may end your introductory APR and apply the Penalty APR if you become more than 60 days late in paying your bill
Loss of Introductory APR If the card has an
introductory rate, this area will list how the lower
introductory rate can be lost
How can the introductory APR be lost on this card?
If the cardholder is more than 60 days late in paying the bill
What APR will the cardholder be charged if the introductory
rate is lost?
The Penalty APR of 28.99%
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 29 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Credit Card Chaos
• Fixed-rate APR for Purchases vs. Variable-rate APR for Purchases
• Introductory Rate vs. No Introductory Rate • APR for Purchases Greater than or Equal to 15% vs. APR
for Purchases Less than 15% • No Minimum Interest Charge vs Minimum Interest Charge • Annual Fee vs. No Annual Fee • Balance Transfer Fee vs. No Balance Transfer Fee
Why is it important to understand how to read a credit card offer?
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 30 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Receiving a Credit Card
• Generally must be 21 years of age or older UNLESS
• Show documentation of sufficient income • Have a co-signer
If someone is a co-signer on a an account, they are equally as responsible and their
credit report is impacted
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 31 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Receiving a Credit Card
Comparison shop for a credit card
Compare credit card offers and determine which card to apply for
Complete a credit application
A form requesting information about a person’s ability to repay
Lenders conduct a credit investigation
A comparison of information on credit application to information on a credit report
Approval?
Applicant may or may not be approved for the card they apply for (depends on creditworthiness)
Credit card companies send pre-approved credit card applications in the mail when the individual has
passed their initial credit check
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 32 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Credit Card Statements
• Outline important information about the card • The 2009 CARD Act required credit card
companies to include specific information about a card account in the statement
Andrew’s Credit Card Statement Please help Andrew interpret his credit card statement
© Family Economics & Financial Education –July 2010 – The Essentials to Take Charge of Your Finances– Understanding a Credit Card Essentials Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.4.2.G1
Transactions Reference Number Trans Date Post Date Description of Transaction or Credit Amount
XXXX1 2/22 2/23 Store #1 $529.57 XXXX2 2/25 2/26 Payment $450.00 - XXXX3 2/26 2/26 Cash Advance $318.00 XXXX4 3/15 3/17 Balance Transfer $785.00
Fees XXXX5 2/23 2/23 Late Fee $35.00
XXXX6 2/27 2/27 Balance Transfer Fee $23.55
XXXX7 2/28 2/28 Cash Advance Fee $10.90
Total Fees for this Period $69.45
Interest Charged Interest Charge on Purchases $6.31
Interest Charge on Cash Advances $4.58
Total Interest for this Period $10.89
Payment Information New Balance $1784.53 Minimum Payment Due $53.00 Payment Due Date 4/20/12 Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 fee and your APR’s may be increased up to the Penalty rate of 28.99% Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example…
Interest Charge Calculation Type of Balance Annual Percentage Rate (APR) Balance Subject to Interest Rate Interest Charge
Purchases 14.99% $512.14 $6.31 Cash Advances 21.99% $253.50 $4.58 Balance Transfers 0.00% $637.50 $0.00
Summary of Account Activity Previous Balance 535.07 Payments -450.00 Purchases +529.57 Balance Transfers +785.00 Cash Advances +318.00 Past Due Amount +0.00 Fees Charged +69.45 Interest Charged +10.89 New Balance $1,784.53 Credit Limit $2,000.00 Available credit $215.47 Statement closing date 3/22/2012 Days in billing cycle 30
If you make no additional charges using this card and
each month you pay…
You will pay off the balance shown on this statement in
about…
And you will end up paying an estimated total
of…
Only the minimum payment
10 years $3,284
$62 3 years $2,232
Notice of Changes to Your Interest Rates You have triggered the Penalty APR of 28.99%. This change will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, the Penalty APR will apply to these transactions. We may keep the APR at this level indefinitely. Transactions made before 4/9/12: Current rates will continue to apply to these transactions. If you become more than 60 days late on your account, the Penalty APR will apply to those transactions as well.
Important Changes to Your Account Terms The following is a summary of changes that are being made to your account terms. For more detailed information, please refer to the booklet enclosed with this statement. These changes will impact your account as follows:
Transactions made on or after 4/9/12: As of 5/10/12, APR for Purchases will increase to 16.99%. Transactions made before 4/9/12: Current APRs will continue to apply to these transactions.
2012 Totals Year-to-Date Total fees charged in 2012 $90.14 Total interest charged in 2012 $18.27
Andrew’s Credit Card Statement
Summary of Account Activity • Payment and credit amounts • Purchase totals • Balance transfer and cash
advance totals • Fee and interest charges • Amount past due • New balance • Available credit
How much did Andrew charge in new purchases during this credit card
billing cycle?
$529.57 10
9
8
7
6 5
4 3
2
1
© Family Economics & Financial Education –July 2010 – The Essentials to Take Charge of Your Finances– Understanding a Credit Card Essentials Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.4.2.G1
Transactions Reference Number Trans Date Post Date Description of Transaction or Credit Amount
XXXX1 2/22 2/23 Store #1 $529.57 XXXX2 2/25 2/26 Payment $450.00 - XXXX3 2/26 2/26 Cash Advance $318.00 XXXX4 3/15 3/17 Balance Transfer $785.00
Fees XXXX5 2/23 2/23 Late Fee $35.00
XXXX6 2/27 2/27 Balance Transfer Fee $23.55
XXXX7 2/28 2/28 Cash Advance Fee $10.90
Total Fees for this Period $69.45
Interest Charged Interest Charge on Purchases $6.31
Interest Charge on Cash Advances $4.58
Total Interest for this Period $10.89
Payment Information New Balance $1784.53 Minimum Payment Due $53.00 Payment Due Date 4/20/12 Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 fee and your APR’s may be increased up to the Penalty rate of 28.99% Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example…
Interest Charge Calculation Type of Balance Annual Percentage Rate (APR) Balance Subject to Interest Rate Interest Charge
Purchases 14.99% $512.14 $6.31 Cash Advances 21.99% $253.50 $4.58 Balance Transfers 0.00% $637.50 $0.00
Summary of Account Activity Previous Balance 535.07 Payments -450.00 Purchases +529.57 Balance Transfers +785.00 Cash Advances +318.00 Past Due Amount +0.00 Fees Charged +69.45 Interest Charged +10.89 New Balance $1,784.53 Credit Limit $2,000.00 Available credit $215.47 Statement closing date 3/22/2012 Days in billing cycle 30
If you make no additional charges using this card and
each month you pay…
You will pay off the balance shown on this statement in
about…
And you will end up paying an estimated total
of…
Only the minimum payment
10 years $3,284
$62 3 years $2,232
Notice of Changes to Your Interest Rates You have triggered the Penalty APR of 28.99%. This change will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, the Penalty APR will apply to these transactions. We may keep the APR at this level indefinitely. Transactions made before 4/9/12: Current rates will continue to apply to these transactions. If you become more than 60 days late on your account, the Penalty APR will apply to those transactions as well.
Important Changes to Your Account Terms The following is a summary of changes that are being made to your account terms. For more detailed information, please refer to the booklet enclosed with this statement. These changes will impact your account as follows:
Transactions made on or after 4/9/12: As of 5/10/12, APR for Purchases will increase to 16.99%. Transactions made before 4/9/12: Current APRs will continue to apply to these transactions.
2012 Totals Year-to-Date Total fees charged in 2012 $90.14 Total interest charged in 2012 $18.27
Andrew’s Credit Card Statement
10
9
8
7
6 5
4 3
2
1
Payment Information • Includes:
• Total new balance • Minimum payment
amount • Date payment is due
• Payment due dates must be consistent month to month
• Monthly statements must be sent at least 21 days before a credit card payment is due
What is Andrew’s minimum payment due for this billing cycle?
$53.00
© Family Economics & Financial Education –July 2010 – The Essentials to Take Charge of Your Finances– Understanding a Credit Card Essentials Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.4.2.G1
Transactions Reference Number Trans Date Post Date Description of Transaction or Credit Amount
XXXX1 2/22 2/23 Store #1 $529.57 XXXX2 2/25 2/26 Payment $450.00 - XXXX3 2/26 2/26 Cash Advance $318.00 XXXX4 3/15 3/17 Balance Transfer $785.00
Fees XXXX5 2/23 2/23 Late Fee $35.00
XXXX6 2/27 2/27 Balance Transfer Fee $23.55
XXXX7 2/28 2/28 Cash Advance Fee $10.90
Total Fees for this Period $69.45
Interest Charged Interest Charge on Purchases $6.31
Interest Charge on Cash Advances $4.58
Total Interest for this Period $10.89
Payment Information New Balance $1784.53 Minimum Payment Due $53.00 Payment Due Date 4/20/12 Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 fee and your APR’s may be increased up to the Penalty rate of 28.99% Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example…
Interest Charge Calculation Type of Balance Annual Percentage Rate (APR) Balance Subject to Interest Rate Interest Charge
Purchases 14.99% $512.14 $6.31 Cash Advances 21.99% $253.50 $4.58 Balance Transfers 0.00% $637.50 $0.00
Summary of Account Activity Previous Balance 535.07 Payments -450.00 Purchases +529.57 Balance Transfers +785.00 Cash Advances +318.00 Past Due Amount +0.00 Fees Charged +69.45 Interest Charged +10.89 New Balance $1,784.53 Credit Limit $2,000.00 Available credit $215.47 Statement closing date 3/22/2012 Days in billing cycle 30
If you make no additional charges using this card and
each month you pay…
You will pay off the balance shown on this statement in
about…
And you will end up paying an estimated total
of…
Only the minimum payment
10 years $3,284
$62 3 years $2,232
Notice of Changes to Your Interest Rates You have triggered the Penalty APR of 28.99%. This change will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, the Penalty APR will apply to these transactions. We may keep the APR at this level indefinitely. Transactions made before 4/9/12: Current rates will continue to apply to these transactions. If you become more than 60 days late on your account, the Penalty APR will apply to those transactions as well.
Important Changes to Your Account Terms The following is a summary of changes that are being made to your account terms. For more detailed information, please refer to the booklet enclosed with this statement. These changes will impact your account as follows:
Transactions made on or after 4/9/12: As of 5/10/12, APR for Purchases will increase to 16.99%. Transactions made before 4/9/12: Current APRs will continue to apply to these transactions.
2012 Totals Year-to-Date Total fees charged in 2012 $90.14 Total interest charged in 2012 $18.27
Andrew’s Credit Card Statement
10
9
8
7
6 5
4 3
2
1
Late Payment Warning • States what will happen if a
payment is late- usually additional fees and a higher interest rate
Minimum Payment Warning • Estimate of how long it can
take to pay off a credit card balance if only the minimum payment is made each month
How long will it take Andrew to pay off the balance of his credit card if he only pays the minimum payment?
10 years
© Family Economics & Financial Education –July 2010 – The Essentials to Take Charge of Your Finances– Understanding a Credit Card Essentials Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.4.2.G1
Transactions Reference Number Trans Date Post Date Description of Transaction or Credit Amount
XXXX1 2/22 2/23 Store #1 $529.57 XXXX2 2/25 2/26 Payment $450.00 - XXXX3 2/26 2/26 Cash Advance $318.00 XXXX4 3/15 3/17 Balance Transfer $785.00
Fees XXXX5 2/23 2/23 Late Fee $35.00
XXXX6 2/27 2/27 Balance Transfer Fee $23.55
XXXX7 2/28 2/28 Cash Advance Fee $10.90
Total Fees for this Period $69.45
Interest Charged Interest Charge on Purchases $6.31
Interest Charge on Cash Advances $4.58
Total Interest for this Period $10.89
Payment Information New Balance $1784.53 Minimum Payment Due $53.00 Payment Due Date 4/20/12 Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 fee and your APR’s may be increased up to the Penalty rate of 28.99% Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example…
Interest Charge Calculation Type of Balance Annual Percentage Rate (APR) Balance Subject to Interest Rate Interest Charge
Purchases 14.99% $512.14 $6.31 Cash Advances 21.99% $253.50 $4.58 Balance Transfers 0.00% $637.50 $0.00
Summary of Account Activity Previous Balance 535.07 Payments -450.00 Purchases +529.57 Balance Transfers +785.00 Cash Advances +318.00 Past Due Amount +0.00 Fees Charged +69.45 Interest Charged +10.89 New Balance $1,784.53 Credit Limit $2,000.00 Available credit $215.47 Statement closing date 3/22/2012 Days in billing cycle 30
If you make no additional charges using this card and
each month you pay…
You will pay off the balance shown on this statement in
about…
And you will end up paying an estimated total
of…
Only the minimum payment
10 years $3,284
$62 3 years $2,232
Notice of Changes to Your Interest Rates You have triggered the Penalty APR of 28.99%. This change will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, the Penalty APR will apply to these transactions. We may keep the APR at this level indefinitely. Transactions made before 4/9/12: Current rates will continue to apply to these transactions. If you become more than 60 days late on your account, the Penalty APR will apply to those transactions as well.
Important Changes to Your Account Terms The following is a summary of changes that are being made to your account terms. For more detailed information, please refer to the booklet enclosed with this statement. These changes will impact your account as follows:
Transactions made on or after 4/9/12: As of 5/10/12, APR for Purchases will increase to 16.99%. Transactions made before 4/9/12: Current APRs will continue to apply to these transactions.
2012 Totals Year-to-Date Total fees charged in 2012 $90.14 Total interest charged in 2012 $18.27
Andrew’s Credit Card Statement
10
9
8
7
6 5
4 3
2
1 Notice of Changes to Your Interest Rates
• If a cardholder triggers the Penalty APR, they must be notified that their rates will be increasing
Has Andrew triggered the Penalty APR?
Yes, he will pay 28.99% on all transactions made after 4/9/12.
© Family Economics & Financial Education –July 2010 – The Essentials to Take Charge of Your Finances– Understanding a Credit Card Essentials Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.4.2.G1
Transactions Reference Number Trans Date Post Date Description of Transaction or Credit Amount
XXXX1 2/22 2/23 Store #1 $529.57 XXXX2 2/25 2/26 Payment $450.00 - XXXX3 2/26 2/26 Cash Advance $318.00 XXXX4 3/15 3/17 Balance Transfer $785.00
Fees XXXX5 2/23 2/23 Late Fee $35.00
XXXX6 2/27 2/27 Balance Transfer Fee $23.55
XXXX7 2/28 2/28 Cash Advance Fee $10.90
Total Fees for this Period $69.45
Interest Charged Interest Charge on Purchases $6.31
Interest Charge on Cash Advances $4.58
Total Interest for this Period $10.89
Payment Information New Balance $1784.53 Minimum Payment Due $53.00 Payment Due Date 4/20/12 Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 fee and your APR’s may be increased up to the Penalty rate of 28.99% Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example…
Interest Charge Calculation Type of Balance Annual Percentage Rate (APR) Balance Subject to Interest Rate Interest Charge
Purchases 14.99% $512.14 $6.31 Cash Advances 21.99% $253.50 $4.58 Balance Transfers 0.00% $637.50 $0.00
Summary of Account Activity Previous Balance 535.07 Payments -450.00 Purchases +529.57 Balance Transfers +785.00 Cash Advances +318.00 Past Due Amount +0.00 Fees Charged +69.45 Interest Charged +10.89 New Balance $1,784.53 Credit Limit $2,000.00 Available credit $215.47 Statement closing date 3/22/2012 Days in billing cycle 30
If you make no additional charges using this card and
each month you pay…
You will pay off the balance shown on this statement in
about…
And you will end up paying an estimated total
of…
Only the minimum payment
10 years $3,284
$62 3 years $2,232
Notice of Changes to Your Interest Rates You have triggered the Penalty APR of 28.99%. This change will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, the Penalty APR will apply to these transactions. We may keep the APR at this level indefinitely. Transactions made before 4/9/12: Current rates will continue to apply to these transactions. If you become more than 60 days late on your account, the Penalty APR will apply to those transactions as well.
Important Changes to Your Account Terms The following is a summary of changes that are being made to your account terms. For more detailed information, please refer to the booklet enclosed with this statement. These changes will impact your account as follows:
Transactions made on or after 4/9/12: As of 5/10/12, APR for Purchases will increase to 16.99%. Transactions made before 4/9/12: Current APRs will continue to apply to these transactions.
2012 Totals Year-to-Date Total fees charged in 2012 $90.14 Total interest charged in 2012 $18.27
Andrew’s Credit Card Statement
10
9
8
7
6 5
4 3
2
1 Important Changes to Your
Account Terms • Cardholders must be notified
of any raise in rates or fees or any other significant changes to the account at least 45 days before the changes take effect
• Any changes can only apply to future transactions (new charges)
• Consumer has the option of closing the account before the changes go into effect
© Family Economics & Financial Education –July 2010 – The Essentials to Take Charge of Your Finances– Understanding a Credit Card Essentials Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.4.2.G1
Transactions Reference Number Trans Date Post Date Description of Transaction or Credit Amount
XXXX1 2/22 2/23 Store #1 $529.57 XXXX2 2/25 2/26 Payment $450.00 - XXXX3 2/26 2/26 Cash Advance $318.00 XXXX4 3/15 3/17 Balance Transfer $785.00
Fees XXXX5 2/23 2/23 Late Fee $35.00
XXXX6 2/27 2/27 Balance Transfer Fee $23.55
XXXX7 2/28 2/28 Cash Advance Fee $10.90
Total Fees for this Period $69.45
Interest Charged Interest Charge on Purchases $6.31
Interest Charge on Cash Advances $4.58
Total Interest for this Period $10.89
Payment Information New Balance $1784.53 Minimum Payment Due $53.00 Payment Due Date 4/20/12 Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 fee and your APR’s may be increased up to the Penalty rate of 28.99% Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example…
Interest Charge Calculation Type of Balance Annual Percentage Rate (APR) Balance Subject to Interest Rate Interest Charge
Purchases 14.99% $512.14 $6.31 Cash Advances 21.99% $253.50 $4.58 Balance Transfers 0.00% $637.50 $0.00
Summary of Account Activity Previous Balance 535.07 Payments -450.00 Purchases +529.57 Balance Transfers +785.00 Cash Advances +318.00 Past Due Amount +0.00 Fees Charged +69.45 Interest Charged +10.89 New Balance $1,784.53 Credit Limit $2,000.00 Available credit $215.47 Statement closing date 3/22/2012 Days in billing cycle 30
If you make no additional charges using this card and
each month you pay…
You will pay off the balance shown on this statement in
about…
And you will end up paying an estimated total
of…
Only the minimum payment
10 years $3,284
$62 3 years $2,232
Notice of Changes to Your Interest Rates You have triggered the Penalty APR of 28.99%. This change will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, the Penalty APR will apply to these transactions. We may keep the APR at this level indefinitely. Transactions made before 4/9/12: Current rates will continue to apply to these transactions. If you become more than 60 days late on your account, the Penalty APR will apply to those transactions as well.
Important Changes to Your Account Terms The following is a summary of changes that are being made to your account terms. For more detailed information, please refer to the booklet enclosed with this statement. These changes will impact your account as follows:
Transactions made on or after 4/9/12: As of 5/10/12, APR for Purchases will increase to 16.99%. Transactions made before 4/9/12: Current APRs will continue to apply to these transactions.
2012 Totals Year-to-Date Total fees charged in 2012 $90.14 Total interest charged in 2012 $18.27
Andrew’s Credit Card Statement
10
9
8
7
6 5
4 3
2
1
Transactions • Includes a list of all the
transactions that have occurred since the last statement
• Should be reviewed for errors
Fees and Interest Charged • Must list the fees and interest
charges separately on the monthly statement
Did Andrew pay a late fee?
Yes, he paid $35.00 for a late fee.
© Family Economics & Financial Education –July 2010 – The Essentials to Take Charge of Your Finances– Understanding a Credit Card Essentials Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona
7.4.2.G1
Transactions Reference Number Trans Date Post Date Description of Transaction or Credit Amount
XXXX1 2/22 2/23 Store #1 $529.57 XXXX2 2/25 2/26 Payment $450.00 - XXXX3 2/26 2/26 Cash Advance $318.00 XXXX4 3/15 3/17 Balance Transfer $785.00
Fees XXXX5 2/23 2/23 Late Fee $35.00
XXXX6 2/27 2/27 Balance Transfer Fee $23.55
XXXX7 2/28 2/28 Cash Advance Fee $10.90
Total Fees for this Period $69.45
Interest Charged Interest Charge on Purchases $6.31
Interest Charge on Cash Advances $4.58
Total Interest for this Period $10.89
Payment Information New Balance $1784.53 Minimum Payment Due $53.00 Payment Due Date 4/20/12 Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 fee and your APR’s may be increased up to the Penalty rate of 28.99% Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example…
Interest Charge Calculation Type of Balance Annual Percentage Rate (APR) Balance Subject to Interest Rate Interest Charge
Purchases 14.99% $512.14 $6.31 Cash Advances 21.99% $253.50 $4.58 Balance Transfers 0.00% $637.50 $0.00
Summary of Account Activity Previous Balance 535.07 Payments -450.00 Purchases +529.57 Balance Transfers +785.00 Cash Advances +318.00 Past Due Amount +0.00 Fees Charged +69.45 Interest Charged +10.89 New Balance $1,784.53 Credit Limit $2,000.00 Available credit $215.47 Statement closing date 3/22/2012 Days in billing cycle 30
If you make no additional charges using this card and
each month you pay…
You will pay off the balance shown on this statement in
about…
And you will end up paying an estimated total
of…
Only the minimum payment
10 years $3,284
$62 3 years $2,232
Notice of Changes to Your Interest Rates You have triggered the Penalty APR of 28.99%. This change will impact your account as follows: Transactions made on or after 4/9/12: As of 5/10/12, the Penalty APR will apply to these transactions. We may keep the APR at this level indefinitely. Transactions made before 4/9/12: Current rates will continue to apply to these transactions. If you become more than 60 days late on your account, the Penalty APR will apply to those transactions as well.
Important Changes to Your Account Terms The following is a summary of changes that are being made to your account terms. For more detailed information, please refer to the booklet enclosed with this statement. These changes will impact your account as follows:
Transactions made on or after 4/9/12: As of 5/10/12, APR for Purchases will increase to 16.99%. Transactions made before 4/9/12: Current APRs will continue to apply to these transactions.
2012 Totals Year-to-Date Total fees charged in 2012 $90.14 Total interest charged in 2012 $18.27
Andrew’s Credit Card Statement
10
9
8
7
6 5
4 3
2
1
Year-to-Date Totals • Total amount paid in fees
and interest charges for the current year
What is the total amount of interest Andrew has paid in the year 2012?
$18.27
Interest Charge Calculation • Includes a summary of the
the different types of transactions
Why is it important to understand how to read a credit card statement?
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 40 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Truth in Lending Act
Limits liability for unauthorized credit card charges to $50.00 per card
Must write a letter within 60 days of the first bill containing the error
If a credit card number is used fraudulently but the card itself was not used, the individual has no
personal liability
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 41 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Credit Card Safety Tips
Sign card with a signature and “Please
see ID”
Do not leave cards lying around, and
report lost or stolen cards promptly
Close unwanted accounts by writing and phone, then cut
up the card
Do not give out account numbers unless making a
purchase
Keep a list of all cards, account numbers, and phone lists separate
from cards
Shred all pre-approved credit card offers, applications, or
solicitations
What are safety tips for using a credit card? Brainstorm!
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 42 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Summary
A credit card is pre-approved credit which can be used for the purchase of goods and services now and
payment of them later
To avoid paying interest on a credit card, pay the balance in full every month
A credit card can have a positive or a negative impact on an individual’s credit history
7.4.2.G1
© Family Economics & Financial Education –September 2010– The Essentials to Take Charge of Your Finances– Understanding Your Credit Card Essentials – Slide # 43 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Summary
Credit card companies are required to disclose the terms and fees of a credit card in the Schumer’s box
Credit card statements outline important information about a credit card and should be checked carefully for errors
Consumers have many protections and rights in regards to credit card use