SECTION 2 : WHAT IS CREDIT

Unit 6: Credit

I Can:

Differentiate Credit Cards from Debit CardsDescribe the importance of APRDefine and apply: credit limit, debt, finance

charge, leasing, line of credit, loan, principle, rent, rent to own, sales tax, balance transfer, amount past due (on statement), penalty APR

Explain what is meant by a smart card

Credit vs. Debit

Credit means your are borrowing money and will pay interest on what you have borrowed

Debit means you are spending money already in your checking account and you will not pay interestIf you accidently charge more to your

debit card than you have in the bank, you will have to pay an overdraft fee!

APR

Annual Percentage Rate is as important when borrowing as APY is when investing. This is the PRICE you will pay for borrowing the moneyThis can be fixed-doesn’t change

Or variable- can change

Reading your statement

credit limit: the most you can borrowfinance charge: fees related to borrowingline of credit: any credit source extended to youPrinciple: the amount you boughtbalance transfer: taking all of the money you’ve

charged from one card and moving it to another (with lower APR)

amount past due (on statement): amount you didn’t pay on time

penalty APR: a higher interest rate charged to you as punishment (for late payments, going over your limit, etc)

sales tax: amount you pay beyond the cost of the item you purchased

Other options

Leasing: pay to use the product, but you will give it back after a certain amount of times

Loan: bank or lender gives you a lump sum, which you pay back with interest

Rent: borrow for a short time and pay for that time

rent to own: pay rent until you’ve paid entire amount, then you own it. Usually pay 200% higher than to have bought

Can I?

Differentiate Credit Cards from Debit CardsDescribe the importance of APRDefine and apply: credit limit, debt, finance

charge, leasing, line of credit, loan, principle, rent, rent to own, sales tax, balance transfer, amount past due (on statement), penalty APR

Explain what is meant by a smart card

I can prove this by completing activity 2.3