credit cards. questions we will answer… what is credit? what does it cost to use credit? what are...

Credit Cards

Questions we will answer…

• What is credit?• What does it cost to use credit?• What are the advantages of using credit?• Where can you get credit?• What questions should you ask yourself

before you use credit?• What happens if you misuse credit?

What is credit?

• Someone is willing to loan you money.

• You are promising to pay it back.

What is interest?• The cost of someone loaning you

money.

APR• Annual Percentage Rate

• The amount of money it costs you each year to use credit.

• Usually shown in an %.

Other fee/ charges…• Annual Fee– Yearly charge for the privilege of using credit

• Finance Charge– The actual dollar cost of using credit

• Origination Fee– Charge for setting up the loan (houses)

• Grace Period– Number of days where there is no fees

• Minimum Payment– The amount that you have to pay (2%)

What is the loan term?

This is the length of the loan

Loan Length matters…

Principle X Rate X Time =

Total you will pay back

Lets calculate…

If you buy your dream house for 100,000 at 10% for a 30 year term.

$100,000 X .10 X 30 =

$300,000

Are there benefits to credit?

• Emergencies– Your car breaks down… - Your water heater dies…

• Buying something now– You can have the house now - the car now…

• Safe– Wont have large amounts of cash on you

• Bonus/ Points/ Rewards– Get something back for your money

Where…

Shopping for the best credit card

• Compare at least three cards• Ask your parents• Look at– APR– Annual Fee– Grace Period– Minimum Payment– Credit Limit– Other Fees

What can happen if you don’t pay it back?

What is a Credit Report?• Is a report of your credit history.

• It shows your personal financial transactions

• Also, shows loans that you have applied for, gotten, paid back.

• Also, shows if you pay bills on time, or not at all.

Filing Bankruptcy

• It is a “Legal process”

• Allows those in excessive debt to get out of debt

Chapter 7 – Chapter 13

• Stays on your record for 10 years

Legal Charges

• Face jail time

Repossess

• They come and reclaim their property

Liens

• Cannot sell your ______ without paying