Personal finance - choosing a credit card

Someone who borrows money

A debtor is:

finance charge

A fee for borrowing money, added to a monthly credit card bill.

debit card

A plastic card that can be used to instantly deduct funds from your checking account.

credit card

A plastic card used to make purchases now and pay for them later.

d) all the above

A positive aspect of using a credit card to make purchases is: a) Useful for making large unexpected purchases b) Can help you establish a positive credit history c) Safer and more convenient than cash d) All the above

introductory rate

A temporary interest rate advertised as a low APR to entice customers to apply for a credit card. After the introductory period, the interest rate will increase to the regular APR.

late fees

Additional fees that can be added to a credit card bill if the cardholder fails to make at least the minimum payment by the due date.

Prepaid cards

Also called value cards, used by retailers as gift cards, travelers as a safe way to get funds n the road, and parents who want to give their kids the convenience of a credit card without the risk

creditor

Any bank or business that extends credit to others; a lender.

debtor

Anyone who owes money; a borrower.

Invitations

Ask consumer to apply for a card, does not require a firm offer of credit, intended to interest consumers in applying

No. Bob will be charged interest on the balance he owes each month.

Bob charged $200 for a plane ticket last month. When he received his statement, he saw that he could pay the minimum balance of just $25. Bob calculated it would take just 8 months to finish paying off his $200 ticket. Is he correct?

$50

By law how much are you held responsible for if a thief has gone on a shopping spree with your card?

It's easy to buy more than you can afford and get into debt, Interest rates on credit cards are usually high, credit cards have a minimum payment can create a deeper hole of debt and lead to late fees.

Cons of credit cards

Revolving Credit

Credit line can be used up to the credit limit, Pay charges in full each month, pay just the minimum, or make a partial payment greater than the minimum due Available credit goes up and down as purchases and payments are made

Credit cards involves borrowing money to make a purchase that you must pay back, Debit cards involve taking money directly from your checking account.

Difference between credit card and debit card

The Consumer Financial Protection Bureau

Formed in 2011; offers information about student credit cards and banking

Secured credit cards

Guaranteed by money deposited in an account, credit limit usually equals the amount of the deposit, and can be used by people with credit problems to reestablish good credit

Only credit cards that offer zero annual fees even if the APR is high

If you are sure that you will be able to pay off the balance of your credit card bill in full each month, you should consider:

Finance charges

If you pay your credit card bill in full every month, you can avoid ________

Check the fine print and compare different companies

Important step to looking for a credit card

credit

Making purchases now and paying for them later (also known as borrowing!).

Sub-prime credit cards

Marketed to people who have poor credit, typically have very low lines of credit, large upfront fees and high interest rates

APR

Most vital information that can be used when comparing credit

Increased annual percentage rates (APRs), Unnecessary fees, A decline in your credit, Denials of future credit

Not managing your credit wisely can lead to...

$50

Oh no! Someone stole your credit card and charged $2,500 worth of purchases before you even knew the card was missing. How much of the unauthorized charges can you be required to pay?

how much interest you'll be expected to pay.

One of the most important terms for a credit card

Pre-approved offers

Personalized and based on credit history, Federal law requires that these solicitations contain a "firm" offer of credit, The only exception is if consumer has experienced a serious decline in creditworthiness since the offer was made

in the mail, from banks, credit unions, and other businesses. Magazines, websites, and The consumer financial protection bureau to compare different offers.

Places to find credit cards:

Can help in a big emergency, useful for making purchases online or over phone, responsible use of credit card can establish good credit history, and credit cards are convenient

Pros of credit cards

Purchases like a computer for more flexibility, especially if you can't cover it at the moment.

Purchases more credit card oriented

Pizza and other charges you are sure you can cover in full

Purchases more debit card oriented

Instant Credit

Salespeople often ask you if you want to get the store's credit card, get a discount on purchases, if the shopper's credit is good, credit is issued on the spot

principal

The amount of money borrowed. On a credit card bill, the principal is the purchase price of all items bought with the card.

5

The average household receives _______ credit card offers per month in the mail, and more by telephone and the Internet

required by law; "Rates and Fees" or "summary of terms"

The box with basic terms is both _____ and often headed with the words _______ or ______

interest rate

The fee, expressed as a percentage, a borrower pays for the use of a creditor's money. At an interest rate of 10%, a borrower would pay $110 for $100 borrowed.

APR

The interest rate that the user of a credit card will pay. What us advertised by creditors varies and should be used to compare different credit card offers.

minimum payment

The smallest required payment that a credit card holder can pay on a monthly bill and still remain in good standing with the lender.

Using a check

The use of a debit card is most like:

Credit limits and Balance Transfers

Things you should look closely at when finding a credit card

look for a box with interest rates, grace period, and annual fees

To compare basic terms...

Pre-approved, invitations to apply, instant credit at stores

Types of Card offers

Emergencies, Big ticket items, Establishing credit, Safer than cash, More purchasing power, Protection from fraud on the Internet

What are credit cards good for

The principal and interest

What does the creditor expect you to pay when you make a purchase.

all the purchases you charged during the month, any fees or finance charges, the total amount you owe and the minimum payment you must make that month to remain in good standing with the creditor.

What the credit card bill includes

Have enough funds in your account

When using a debit card to make purchases, you must be certain you:

Principal

When you borrowed $50 from your rich cousin, and then had to pay her back $60, what is the original $50 called?

APR and fees

You can best compare credit card offers by looking at these two features:

Add finance charges and late fees to your bill

You forgot to pay last month's credit card bill. Your creditor will probably:

the finance charges will compound and late fees will add up.

f you make only the minimum payment and even miss payments .....

invitations to apply

offers come in the mail, by telephone and online

Charge cards are...

pay all charges in full every month by the due date , cannot carry a balance(which means no interest), allow a balance carry-over for specific purchases, such as travel charges