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Financial Literacy
Math 9 – Mrs. Feldes
Credit & Debt
CREDIT:Credit means an arrangement or promise to abank or credit card company to put off payment of a loan or purchase to a later time.
Borrowing more than you can pay back, or mismanaging what you borrow can get you into financial trouble.
TYPES OF CREDIT:A variety of credit & loans are available to consumers, such as:
• a student loan for education;• a mortgage for a home;• a personal loan;• a line of credit from a bank;• a credit card.
TYPES OF CREDIT:
Consumers apply fora personal loan for avariety of reasons.
CREDIT CARDS:Credit cards can be useful, but can cause havoc on your budget if you spend more than you make.
Be careful of owning too many credit cards!
CREDIT CARDS:Some major retail companies offer their own credit cards. Often bonus points or rewards are given to entice you to use their credit card.
CREDIT RATING:
A credit rating is a numerical score that represents how trustworthy you are as a borrower.
A high credit score means you have a good credit rating.A low credit score means you have a bad credit rating.
Your credit rating is checked when you apply for a loan or credit card.
CREDIT RATING:
If you have a good credit rating, you will save money by having the bank give you a better interest rate!
CREDIT RATING:
When repaying a loan or paying a monthly credit card bill, you are working to build a good credit rating.
This could have a big impact later in life when you need to borrow for purchasing a bigger ticket item like a car or home.
ADVANTAGE OF A GOOD RATING:
CREDIT CARD DEBT:
Be careful with credit card debt! Paying the minimum payment may cause you years of debt!
• Generally has an APR of 19‐25%• If a portion of a monthly bill is paid, interested is still
calculated on the entire amount.• If a monthly bill is paid late, interest is charged for the
entire month.
CREDIT CARD DEBT:
Never use your credit card like a debit card!This is called a cash advance.
• Generally the APR for cash advances is higher than the interest for regular purchases on a credit card.
MONEY TIP:
SHARK TANK’S MARK CUBAN
“In your 20’s, it doesn't matter what car you drive. It doesn't matter what kind of clothes you wear. Pay your student loans & don’t get into credit card debt."
Credit Card Debt Explained with a Glass of Water
United States of America
MONEY TIP: DON’T OVERSPEND!
OUR CREDIT WORLD:
Be careful with relying on too much credit to keep up appearances!
DEBT:
Debt refers to money that is owed after making a purchase that you do not pay for immediately!
We use debt as a method of borrowing money to pay for large expenses.
GOOD & BAD DEBT:
Good debt generally has lower interest rates & is often for an appreciating asset or an investment for the future.
Bad debt is any debt where money is used to purchase a depreciating asset. Smart use of money can help lower the interest paid on bad debt.
PAY DAY LOAN:
A payday loan is a short term, high‐cost loan with an extreme interest rate!
• Pay back within two weeks.• May be renewed by paying more fees.
Payday Loans Explained
PAY DAY LOAN:
A “payday loan” store is a privately‐owned business.
They are now mandated by the government to protect customers.
PAY DAY LOAN:
Customers could be fooled if informationis not correctlydisclosed.
Based on a $300 Loan
for 14 days
EXAMPLE:
LET’S CALCULATE RATE:
A Payday Loan for $300 for 14 days The true interest rate must be disclosed as an Annual Percentage Rate (APR).
.. Interest rate = 547.50%
OTHER LOAN OPTIONS:
OTHER LOAN OPTIONS:
A bank loan, or a line of credit have lower interest rates.
The loan can also be paid over a longer period of time.
MONEY TIP:
ELIMINATE BAD DEBT!
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