Presentation Transcript

1. Credit Cards

2. Credit Cards 88 million American households have credit cards Average credit card debt is $9,600 per household
3. Credit Credit – the ability to make purchases with the promise that the money will be repaid later Don’t try to live above your means
4. Credit Cards Credit Cards – allows the card holder to repeatedly purchase products and services on credit Can be issued by: Banks Retail stores Businesses
5. Credit Cards To use, scan card in the electronic card reader In person, Signature usually required to complete transaction For online purchases, enter your: Card Number Expiration Date CVC – Card Verification Code – 3 or 4 digit code on back of card Billing Address
6. Credit Cards Transactions are mini loans made to you by a financial institutions that must be repaid plus interest Interest rate is a percentage previously agreed upon Card issuer is required to clearly explain and document given interest rate Responsibilities are attached to the privilege of being issued a credit card
7. Credit Cards You cannot exceed your Credit Limit The maximum amount of money that a card issuer will allow you to charge Charge – Money borrowed using a credit card Purchases Cash Advances – cash obtained through an ATM or bank
8. Credit Card Statement Statement sent by the card issuer that shows account transactions and balances Can be sent to you by: Mail Email – called an E-statement
9. Credit Card Statement Items included are: Payment due date Outstanding Balance InterestCharge Grace Period Late Fee Annual Fee Cash Advance Cash Advance Limit New purchases/charges Previous Payments Minimum Payment required Annual Percentage Rate
10. Credit Card Statement Payment Due Date Date the card company must receive payment Outstanding Balance The amount of money you need to repay InterestCharge The interest payment Grace period 20-25 days before the card company starts charging late fees Late Fee Penalty charged for not making minimum payment by due date
11. Credit Card Statement New purchases/charges Transaction history since last statement Previous Payments Money paid on the outstanding bill Minimum Payment Lowest amount you can pay on the outstanding balance to keep account in good standing A pre-set amount or percentage of what you owe
12. Credit Card Statement Cash Advance Limit Annual Percentage Rate The yearly interest paid on the account balance
13. Credit Card Calculations On your last statement, you had an outstanding balance of $390. During the current billing cycle, you made purchases totaling $230. You made a payment of $180. What is the outstanding balance?
14. Credit Card Calculations $390 - Previous Outstanding Balance +$230 - Additional Purchases -$180 - Payment made ------------------------------- $440 - Current Outstanding Balance
15. Credit Card Calculations Lets assume the minimum payment due is 2% of the Outstanding Balance which is $440 What is the Minimum Payment required?
16. Credit Card Calculations $440 x 2% $440 x .02 = $8.80
17. Credit Card Calculations Interest Charge Interest you must pay for using Credit Card Credit Card interest is calculated on a daily basis 365 days in a year
18. Credit Card Calculations To find the InterestCharge, follow these steps: Find the Average Daily Balance = Ending Balance / Number of Days in Billing Cycle (30) Find the Daily InterestRate = Annual Percentage Rate / 365 (Number of Days in Year) Calculate the InterestCharge = Average Daily Balance x Daily InterestRate x Number of Days in Billing Cycle (30)
19. Credit Card Calculations Average Daily Balance = $15,000 / 30 $500 Daily Average Interest Rate = 12% / 365 .0328% = .000328 InterestCharge = $500 x .000328 x 30 $4.92
20. Identity Theft