Credit Cards: Personal Finance

PERSONAL FINANCE
Credit Cards
UNITED STATES TOTAL DEBT
 Website:
https://www.newyorkfed.org/microeconomi
cs/hhdc.html
 Complete worksheet and be prepared to

discuss questions.
DISCUSSION PROMPT
 Do you think it’s a good idea for high school
students to have a credit card?
 What about college students?
 Adults?
 Explain why
QUESTION:
Prior years was
How can I get credit?
Now it is
How can I wisely manage credit?

WHAT YOUNG ADULTS SAY
ABOUT CREDIT CARDS
 https://www.youtube.com/watch?v=NtXwlU
DK2co
 After hearing the opinions of the students in

this video, do you think YOU would want a
credit card in college? Why or why not?
CREDIT CARD BASICS
 https://www.youtube.com/watch?v=-OSc-M
m0tJo#t=44
 In your notes, summarize the Difference

between credit & debit
 Three types of credit cards, and
 At least 3 benefits of using a credit card for
purchases.
COSTS WHAT?! - CREDIT CARD
PREMIER
 http://www.thirteen.org/finance/games/itc
ostswhat_creditcard.html
 Read the text & push NEXT on this
interactive to learn about credit cards.
 Then, take the 6-question quiz to test what
you've learned.
CREDIT CARDS
 The credit of today
 Transactions that require a credit card
 Log into Lapointe’s Padlet:
https://padlet.com/jl01128/vd6yrfvgtf40
 Storesare encouraging customers to use their

credit cards to purchase goods & services
 Log into Lapointe’s Padlet: Which stores are famous
for their department store credit cards.
 https://padlet.com/jl01128/p2y5bkgn0hyh
 People have overextended their credit. Part of

lifestyle – making ends meet.
CREDIT CARDS: ADVANTAGES &
DISADVANTAGES
Advantages
 Used correctly – expands purchasing power & raise
your standard of living
 Provides emergency funds – if you don’t have the
cash
 Line of credit - money available when you need it
 Convenient and better service (for ex. Problem
with purchase – withhold payment)
 Deferred Billing
 Service available to charge customers where payment is
billed at a later date. For example – item purchased in
October billed in January, payment is due February
CREDIT CARDS: ADVANTAGES & DISADVANTAGES
Disadvantages
 Credit purchases might cost more than cash
 Merchants must pay fees – usually a % of the sale at no
additional cost to the customer
 Finance Charge 18% or more per year (1 ½% per
month)
 Purchases on credit cards could equal overspending
 No cash has been transferred – don’t realize the
amount
 if in debt that is so high - bankruptcy
 http://www.youtube.com/watch?v=7U6pmk
TC8i0
Credit Card Debt - A Student's Story
TYPES & SOURCES OF CREDIT
 Open-End Credit
 Borrower can use credit up to a stated limit
 Credit can be used again & again as long as
balance owed doesn’t exceed the credit limit
 Charge Cards
 An agreement made to pay the balance in full owed
each month
 Usually 25-day billing period
 Visa, Master Card, Discover, American Express
 Nationwide and overseas
 Rewards or rebates based on purchases made
DECIPHER CREDIT CARDS WITH
THE SCHUMER BOX
 Review this reference sheet:

Decipher Credit Card Offers With the Schume
r Box
 While ALL the information in a Schumer Box

is important, which items do you think
matter most on a day-to-day basis? (Add this
to your notes)
UNDERSTAND YOUR CREDIT
AGREEMENT
 Follow the directions on the worksheet to
complete this activity.
 Schumar box worksheet 1
 Revolving Accounts
 Borrower has option each month to pay balance in
full or make monthly payments
 Most All-purpose cards are:
 Visa, Mastercard, Discover, gasoline cards, and store
cards
 Credit Card Agreements
 Annual Percentage Rate (APR) – cost of credit
expressed as a yearly percentage. Can be variable
rate
 Truth-in-Lending Law – will discuss later
 Credit Utilization
 Paying bill on time
 Fee if over credit limit
 Grace Period
 Time frame to pay current bill in full
 incur no interest charges
 Usually 25 days
 Annual Fees
Fee charged annually range from $15+ is paid
whether you use the card or not.
 Credit Card Agreements
 Transaction Fee
 3% to 10% maybe be charged if use a credit card check,
pay by phone or request a balance transfer
 Penalty Fee
 If go over credit limit or make your payment late
 $25 to $50 is a flat rate
 Finance Charge
 A percentage charged monthly for purchases that were
not paid for. To calculate that use either of the
following formulas:
Credit Card Interest Calculations
1. Change Annual Percentage rate into a decimal
APR 24% = .24 Annual rate
2. Convert ANNUAL rate into a DAILY rate
APR .24 is turned into .24/365 = .0007 daily rate

(let’s round to the 4th place)
3. Multiply daily rate * existing balance = daily interest
4. Daily interest * # of days in a month = monthly

interest
CREDIT CARD INTEREST CALCULATIONS- WHITEBOARD
PRACTICE
1. You have a $3,500 credit card balance
2. Your APR is 29%
3. What is your monthly interest – assume 31 days in

the month? Show your work!
MINIMUM CREDIT CARD PAYMENTS
 How long does it take to payoff a credit card?
 Minimum Payment Worksheet

MINIMUM PAYMENT WORKSHEET
ANSWERS
CREDIT CARD PAYMENT REVIEW
 Part two purchasing a computer.
CREDIT CARD DEBT EXPLAINED
https://www.youtube.com/watch?v=L5qlbISOA
GA
 How can you avoid paying interest on your
credit card?
 Explain what happens if you make the

minimum payment every month.
 How does the credit card companies'

definition of a deadbeat compare to the
traditional meaning?
IT COSTS WHAT?! - CASE FILES
 Read the case files and answer the online
questions to solve this interactive case.
 http://www.thirteen.org/finance/games/itc
ostswhat_casefiles.html
 Answers:
 Kevin, who paid a total of $360.28
 Emma, who paid a total of $714.86
 Maria, who paid a total of $350.00
 Byron, who paid a total of $514.24
SHOPPING WITH INTEREST
 Socrative Review:
WHY WE SPEND MORE WHEN WE
PAY WITH CREDIT CARDS
 Read: http://
www.wisebread.com/why-we-spend-more-w
hen-we-pay-with-credit-cards
 In your own words, write in your notebook

two reasons we tend to spend more with
credit than with cash.
 Be prepared to be called on.
HOW DO WE KEEP CREDIT CARD
SPENDING IN CHECK?
 Use your credit card only for fixed
expenses.
 Always check prices.
 Stay within your budget.
 Make sure you have the cash for it.
 Go on a cash diet.
WHAT IS A BALANCE
TRANSFER?
 http://www.creditcardfinder.com.au/what-i
s-a-balance-transfer.html
 After watching this video, give an example of

why someone might want to utilize a balance
transfer offer.
POTENTIAL PROBLEMS OF
BALANCE TRANSFERS
1. The Transferred Balance Is Usually Credited
First
2. The Transferred Balance Is Usually Credited
First
3. Balance Transfer Fees Eat Up Savings From
Transferring
4. Rewards Can Entice You to Spend More
5. Your Credit Score Can Drop
6. Other Fees May Be Lurking
WHY 0% FINANCING FROM
RETAILERS CAN BE A BAD DEAL
 Interest postponed isn't necessarily interest
denied
 It could hurt your credit
 2 balances can add complications
 Missing payments will stop the 0% interest
period
PERSONAL FINANCE 101: WHAT
IS A CASH ADVANCE?
 http://www.thesimpledollar.com/what-is-a-
cash-advance/
 After reading this article, in your notebook

write down the 3 reasons why a cash advance
is a costly way of using your credit card.
CREDIT CARD LAWS WEBQUEST
 RESEARCH:
 Followthe directions on the worksheet to
complete this activity.
 You may place the answers in your notebook.
UNDERSTANDING YOUR CREDIT
CARD STATEMENT
CARD STATEMENT
 http://www.mycreditunion.gov/Pages/pocket-cents-u
nderstanding-credit-card-statement.aspx
 Learn about credit card statements by hovering over
each orange dot.
 Once you understand the statement, be prepared to
answer the questions on Socrative.
CARD STATEMENT
1. How large a payment must this customer make on 4/20/12 to be considered
on-time with their payment?
2. If the customer wants to avoid paying interest, how much should she send by
4/20/12?
3. What is this customer’s interest rate, going forward?
4. What types of fees are included on this customer’s credit card statement for
the month?
5. How much did this customer pay last month?
6. If you could offer this customer just ONE piece of advice, what would you
choose?
RECAP: TYPES & SOURCES OF CREDIT
 Service Credit
 Providing service for which will paid for later –
 Utility Bills, Telephone, Cell Phone
 Some businesses may extend service credit
 Doctors, lawyers, repair shops, hospitals, dentists
 Retail Stores
 Some stores offer their own credit cards
 Store Benefits
 Additional percentage discount, advance
notification of sales
RECAP: SOURCES OF CREDIT
 Credit Card Companies
 Offers from Visa, Master Card, Discover, etc.
 Affinity cards (professional organizations, college
alumni, etc.)
 AAA Visa, Walmart Visa
 Cash Advance
 ability to borrow cash against your credit card
 Use an ATM, or writing a check
 Higher interest rate and transaction fee (immediate)
 Interest accruals immediately
 Transfer Funds
 Teaser rates – limited time
 Transfer Fees
 Full payment by end – back interest is added to charge

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PERSONAL FINANCE

 Complete worksheet and be prepared to

Prior years was

How can I get credit?

How can I wisely manage credit?

 After hearing the opinions of the students in

 In your notes, summarize the Difference

 Storesare encouraging customers to use their

 People have overextended their credit. Part of

 Review this reference sheet:

 While ALL the information in a Schumer Box

APR 24% = .24 Annual rate

2. Convert ANNUAL rate into a DAILY rate

APR .24 is turned into .24/365 = .0007 daily rate

3. Multiply daily rate * existing balance = daily interest

4. Daily interest * # of days in a month = monthly

1. You have a $3,500 credit card balance

2. Your APR is 29%

3. What is your monthly interest – assume 31 days in

 Minimum Payment Worksheet

 Explain what happens if you make the

 How does the credit card companies'

 In your own words, write in your notebook

 After watching this video, give an example of

 After reading this article, in your notebook

3. What is this customer’s interest rate, going forward?

5. How much did this customer pay last month?

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