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Credit Cards - PowerPoint PPT Presentation


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Credit Cards. Credit Cards. 88 million American households have credit cards Average credit card debt is $9,600 per household. 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. Credit Cards.

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credit cards1
Credit Cards

88 million American households have credit cards

Average credit card debt is $9,600 per household

credit
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

credit cards2
Credit Cards
  • Credit Cards – allows the card holder to repeatedly purchase products and services on credit
  • Can be issued by:
    • Banks
    • Retail stores
    • Businesses
credit cards3
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
credit cards4
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
credit cards5
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
credit card statement
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
credit card statement1
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
credit card statement2
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
credit card statement3
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
credit card statement4
Credit Card Statement
  • Cash Advance Limit
  • Annual Percentage Rate
    • The yearly interest paid on the account balance
credit card calculations
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?

credit card calculations1
Credit Card Calculations

$390 - Previous Outstanding Balance

+$230 - Additional Purchases

-$180 - Payment made

-------------------------------

$440 - Current Outstanding Balance

credit card calculations2
Credit Card Calculations

Lets assume the minimum payment due is 2% of the Outstanding Balance which is $440

What is the Minimum Payment required?

credit card calculations3
Credit Card Calculations

$440 x 2%

$440 x .02 = $8.80

credit card calculations4
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

credit card calculations5
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)

credit card calculations6
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