CREDIT CARDSCREDIT CARDSTHE POWER OF PLASTICTHE POWER OF PLASTIC

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What are credit cards?What are credit cards?

• Loans--NOT Money!• Charge now -- Pay later• Becomes a monthly

payment obligation• What you owe will be

greater than what you charged because of interest

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What is interest?What is interest?• An amount charged by

the lender• Amount depends on

interest rate (APR) and balance

• May be added monthly, weekly or daily

• Increases amount owed if balance is not paid in full

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Know what to expect...Know what to expect...• Know your terms:

– APR

• Annual Percentage Rate

– Grace Period

• Time you have to pay before they slap on the late fees

– Annual Fees

• A flat fee charged each year for the privilege of owning a card

– Minimum payment

• The smallest amount you can pay and still be in good standing

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What would you buy?What would you buy?Dinner for you & friends $85Concert ticket $75Gas $40Clothes $200Weekly pizza delivery $60Tanning $40Spring Break $800Cds $50Road Trip $150Total $1,500

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How much will it cost?How much will it cost?Balance $1,500Monthly Payment $22Interest Rate 17%Years to Pay Debt 17+ YearsTotal Interest Paid $3,124Total Amount Paid $4,624

$1,500$3217%

6+ Years$982

$2,482

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YOUR SITUATION IS:YOUR SITUATION IS:• CREDIT LIMIT $400• CURRENT BALANCE $500• LAST TRANSACTION: $100 Cash

Advance

• All previous charges were purchases

• You’ll pay the balance in full, but 10 days after the payment due date. (second time in six months!)

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YOUR AGREEMENT SAYS:YOUR AGREEMENT SAYS:• APR: 14.65% On Purchases

• OTHER APR: Cash Advance 19.99%

Late Payment 19.99% (if late twice in any six month period)

• Cash Advances 3% of advance, but not less than $10.00

• Other Fees Late Payment $29.00

Over Credit Limit $29.00

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YOU PAY:YOU PAY:

• $400 @ 14.65% $404.88

• $100 @ 19.99% 101.67

• Late Payment Fee 29.00

• Cash Advance Fee 10.00

• Over-Credit-Limit Fee 29.00

• Balance Due $574.55

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Do’s & Don’tsDo’s & Don’tsDO...• Limit number of cards

• Plan a budget

• Pay your monthly balance in full

• Keep track of what you bought

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Do’s & Don’tsDo’s & Don’tsDON’T…• Miss payments

• Exceed credit limit

• Take cash advances

• Charge more than you can pay back

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Can credit card debt Can credit card debt affect your future?affect your future?

• Limit career choices

• Affect future purchases

• Reduce your standard of living

• Stress & Anxiety!!!

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USE YOUR USE YOUR CREDIT WISELY!!!CREDIT WISELY!!!