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PICPA The Cost of Credit Cards. Presented by: . What is a Credit Card?. Fast Fact. Credit Cards let you charge purchases up to a preset dollar limit, called your available credit or credit limit. Fast Fact.

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PICPA

The Cost of Credit Cards

Presented by:



Fast fact
Fast Fact

  • Credit Cards let you charge purchases up to a preset dollar limit, called your available credit or credit limit


Fast fact1
Fast Fact

  • Credits cards like Visa and MasterCard are issued by banks, which charge an interest rate – called Annual Percentage Rate (APR) – on purchases


Fast fact2
Fast Fact

  • Some credit cards include annual fees – once a year fees for the privilege of using the card


Fast fact3
Fast Fact

  • All credit cards charge late fees – charges incurred when payments are late



Fast fact4
Fast Fact card?

  • Debit cards are not credit cards; debit cards are similar to checks, allowing retailers to debit, or reduce, your bank account directly for the amount of a purchase


When you use a debit card for purchases which of the following are true
When you use a debit card for purchases which of the following are true?

A. You are billed monthly for the amount of money you charge to the card.

B. Money is deducted directly from your account

C. A bank will approve debit transactions even if a person has insufficient funds in their account.


B and c
B and C following are true?

B. Money is deducted directly from your account

C. A bank will approve debit transactions even if a person has insufficient funds in their account (then the bank tacks on an overdraft fee).



Credit card question
Credit Card Question following are true?

What is the average interest rate for a credit card?

A. 5.9%

B. 11.9%

C. 18.9%


C 18 9
C. 18.9% following are true?

That’s almost 20% more you are paying when you use a credit card. Even if you bought something on sale, you are paying 20% more when you use your credit card.


Fast fact5
Fast Fact following are true?

Simple Interest =

Principal X Interest Rate X Time


Example
Example following are true?

  • $1,000.00

  • 18% APR

  • 1 month billing cycle

  • What is the interest?


Example1
Example following are true?

  • PRINCIPAL = $1,000.00

  • RATE = 18% APR

  • TIME = 1 out of 12 months


Example2
Example following are true?

  • PRINCIPAL X RATE X TIME

    1,000 x 18% x (1/12) =

    $15


Credit card myth
Credit Card Myth following are true?

  • Paying just the minimum balance each month is okay


Credit card fact
Credit Card Fact following are true?

  • Paying just the minimum balance extends your balance and payments for months, even years adding to the interest paid


Example3
Example following are true?

1,000 x 18% x (1/12) = $15.00

Pay $20 minimum payment.

1,000 + 15.00 – 20.00 = $995.00

995.00 x 18% x (1/12) = $14.93

Pay $20 minimum payment.

995.00 + 14.93 – 20.00 = $989.93

Total paid = $40, reduced balance $11


If you kept paying 20 a month how long would it take you to pay off your balance
If you kept paying $20 a month, how long would it take you to pay off your balance?

At that rate it would take about 90 months or 7.5 years to pay off the card!!!


How much interest will you pay
How much interest will you pay? to pay off your balance?

At that rate you would pay approximately $800 in interest!

Your initial $1000 purchase now cost you $1800!



Fast facts
Fast Facts to pay off your balance?

  • When you need protection on a repair or purchase, e.g. auto, appliances, mail order


Fast fact6
Fast Fact to pay off your balance?

  • As a safe substitute for cash


Fast fact7
Fast Fact to pay off your balance?

  • When placing orders by phone

    or internet


Fast fact8
Fast Fact to pay off your balance?

  • As a means of identification


Fast fact9
Fast Fact to pay off your balance?

  • When accurate records are needed


What if i have credit card debt

What if I have credit card debt? to pay off your balance?


Paying credit card debt
Paying Credit Card Debt to pay off your balance?

  • Stop making purchases using credit – pay cash!


Paying credit card debt1
Paying Credit Card Debt to pay off your balance?

  • Pay more than the minimum balance each month.


Paying credit card debt2
Paying Credit Card Debt to pay off your balance?

  • Negotiate with the bank for a lower interest rate, or transfer the balance to a credit card with a lower interest rate


Questions comments
Questions? Comments? to pay off your balance?


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