Understanding_Credit_Cards_Note_Taking_Guide_2.6.3.L1 (1).pdf

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Unformatted text preview: Page | 12 2.6.3.L1 Understanding Credit Cards Note Taking Guide Total Points Earned Total Points Possible Percentage Shravya Sarathy Name Date 12/18/20 Class 1 A credit card is: a plastic card that you can use to access a line of credit that has been established in advance The cost of credit is expressed as: maximum dollar amount that can be borrowed What is the minimum payment? amount due each month the card has balance What impact does only paying the minimum payment have on a consumer? It makes the loan drag out for longer and interest piles up Identify four positive credit card behaviors: Pay credit card balances in full every month Pay credit card bills on time Be conscious of how credit cards affect your credit history Check the monthly credit card statement for errors What are three ways a credit card is a convenient payment tool? No need to carry large amounts of cash Useful in emergencies Often required © Take Charge Today – May 2014 – Understanding Credit Cards 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 Page | 13 2.6.3.L1 Why may consumers overspend when using a credit card? Approved for amounts of money that they can spend quickly If you lose your credit card, what should you do? How much are you liable for? Why should you check your statements monthly? $50.00 Report it To make sure there are no fraudulent incidents Summarize why credit cards are safer than debit cards for online shopping. More protection against fraud, less liability for losses, and no direct connection to bank account Example of a credit card reward: To offer these benefits, credit card companies may... Cash rebates charge additional fees or higher interest rates Example of a credit card reward: To determine if the benefit is for you, you should... determine if the costs outweigh the benefits Travel insurance Two advantages of a credit card Two disadvantages of a credit card Convenient payment tool Useful for emergencies Interest can be costly when a balance is revolved Additional penalty fees met apply Why is reading the Schumer Box information closely important? To find out the terms of the credit card © Take Charge Today – May 2014 – Understanding Credit Cards 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 Page | 14 2.6.3.L1 Use the space provided to describe each section of the credit card offer and define vocabulary words. Schumer Box‐ Interest Rates and Interest Charges Annual Percentage Rate (APR) for Purchases APR for Balance Transfers Interest rate paid for purchases Multiple interest rates may be listed Final interest rate may depend on creditworthiness of applicant Act of transferring debt from one credit card to the other APR for Cash Advances Withdrawing cash from an ATM using a credit card Penalty APR and When it Applies Interest rate charged on new transactions if the penalty terms in the contract are triggered How to Avoid Paying Interest on Purchases Pay bill in full by due date Minimum Interest Charge Generally $0.50-$2 a month For Credit Card Tips from the Federal Reserve Board Stay under 30% of your total credit limit Use the card for needs, not wants Pay off your balance each month Fees yearly fee that may be charged for having a credit card Annual fee: Set‐up and Maintenance Fees Transaction Fees Penalty Fees Set-up fee: fee for opening the account Participation fee: monthly fee for having the credit card Additional card fee: fee to have a second person on the account Balance transfer fees Cash advance fees Other Late-payment fee: charged when a cardholder does not make the minimum monthly payment by the due date Over-the-limit fee: charged if the account balance goes over the set credit limit Returned payment fee: applies if the cardholder does not have enough money to cover a payment. * 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 Credit card companies use one of several methods to calculate an outstanding credit card balance If the card has an introductory rate, this area will list how the lower introductory rate can be lost © Take Charge Today – May 2014 – Understanding Credit Cards 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 Page | 15 2.6.3.L1 Describe how an individual obtains a credit card. Shop around: compare credit card options to find the best one for your needs Complete a credit application: form requesting information about a person's ability to repay What does it mean if an individual receives a pre‐ approved credit card application? The credit card company sends them in the mail if the person passed their initial check Approval: May or may not be approved (creditworthiness) If you are under 21, how do you receive a credit card? Either having a co-signer or proof of sufficient income Why is it important to read a monthly statement closely? To make sure there are no charges that are unaccounted for Describe each section of a credit card statement. Credit Card Statement Summary of Account Activity Payment Information Late Payment Warning Minimum Payment Warning Notice of changes to your interest rates Other changes to your account terms Transactions Overview of credit card Total new balance, minimum payment amount, date payment is due What will happen if a payment is late—usually additional fees and a higher interest rate Estimate of how long it can take to pay off balance if only minimum payment is made Notifies card holder if rates are changing Must be notified of any significant changes, any changes can only apply to new charges, account can be closed before the changes go into effect List of all transactions since the last statement, should be reviewed for errors Fees and interest charges must be listed separately Fees and Interest Charges Year‐to‐date Totals Total amount paid in fees and interest charges for the current year Interest Charge Summary of the different types of transactions Calculation © Take Charge Today – May 2014 – Understanding Credit Cards 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 ...
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