Objective: analyze the adv./disadv. and differences between credit, debit and prepaid cardsLesson 7.2

• Pay Now: Debit Card• Pay Later: Credit Cards• Pay In Advance: Prepaid Cards

Debit- Pay Now• Check card• Funds drawn from your account immediately• Spend only what you have• Careful – overdraft fees and/or rejection at POS• Advantages:• Less cash to carry, most have zero liability if card is lost or stolen,

NO APR (interest charged), no monthly payments, some offer reward programs

• Disadvantages: • Fees for overdrafts, fees for using ATMS outside the network from

both your bank and the bank that operates the ATM you are using.

Credit- Pay Later• Promise to pay later with a line of credit• Strict laws on issuing cards to anyone under the age of 21 (Credit Card Act 2009-10)• May need cosigner• Full amount paid each month – no interest• If not, the Interest will build• Advantages:• Buy at POS, online, phone, mail order• Helps to establish a credit history• Complete transactions that are difficult with cash:

airline tickets, rental cars, hotel reservations, collision damage waiver on rental cars.Zero liability protection if lost or stolenCash AdvancesRewards programs– Creditcards.com for details on various card offers

Continued:

• Disadvantages:– Impulse buying becomes easier– Interest that accumulates– Late payments, credit reports, poor scores if

handled poorly– Rates can be extremely high– Kohls – 19.8 % -- 22.0%– Penneys – 18.5%

Pay in Advance Cards- Pre Paid

• Gift Cards –stores or online• Visa Gift Cards- Fee to purchase, good anywhere

visa is accepted• Reloadable – online or by phone, use anywhere

debit cards are accepted• Adv: limit on spending, track your spending, less

need to carry cash, most provide zero liability, No APR, No Debt

• Disadv: limited to certain stores, charge fees for purchase (visa),

Vocabulary- use the internet to define the following:

• Annual Fee-• Available credit-• Cash Advance transaction finance charge• Cardholder agreement• Credit Line• Finance Charge• Grace Period

Continued

• Introductory Rates-• Late Payment fee-• Minimum monthly payment-• Overdraft-

Closure Activity

• Complete Module Three • If time runs short, complete the rest of

module three for homework.