Credit Cards

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