Credit Cards

1
Credit Cards Other Options The Good, The Bad
The Ugly

• Carol Bailey, VP
• Federal Savings Bank
• Dover, NH

2
Just Imagine

• Imagine being 30 years old and still paying off
  a slice of pizza you bought when you were in
  college. Sounds crazy, but for plenty of people
  problems with credit card debt can lead to that
  very situation. Learning about responsible credit
  card use now can save you from having to dig
  yourself out of debt after you graduate.
  www.collegeboard.com

3
More To Ponder

• By the time a college student has graduated,
  chances are that he or she will have more than
  3,000 in credit card debt and have four or
  more credit cards.
• As young adults grow more comfortable with
  spending on plastic, credit card companies are
  aiming at making a generation of future credit
  aficionados and are marketing at kids as young
  as 3 years old.
• CBS.com

4
The Basics

• Credit Cards I am borrowing someones money to
  pay for this
• Debit Cards I am using my own money (from my
  checking account) to pay for this

5
Credit Card Basics

• A credit card is issued by a lender.
• When you use a credit card you are taking on
  debt. You can either pay the balance off
  immediately or pay it off over a period of time.
• Benefits you don't have to carry cash or write a
  check and can pay for the purchase at a later
  time.

6
Debit Card Basics

• A debit card is not a credit based transaction.
• When you use a debit card the funds are taken
  from the account associated with the card, such
  as a checking or savings account.
• When using a debit card you can usually select
  "debit" or "credit the money still comes out of
  your checking or savings account.

7
Debit Card Basics

• Selecting debit means you must enter a personal
  identification number (PIN).
• Selecting credit means you do not have to use a
  PIN and are not charged banking fees sometimes
  associated with using a debit card. Generally,
  you will have to sign for these transactions.

8
Whats The Big Deal?

• Credit cards are a convenient form of borrowing.
  
• People use them to purchase goods and services.
• Credit cards are a revolving line of credit.
• An unlimited number of purchases can be made up
  to a pre-approved credit limit.
• Sounds pretty good right?

9
Credit Cards

• At least a portion of the bill every month
  (minimum payment) must be paid, which is often a
  percentage of your balance.
• Charge cards are used like credit cards, but you
  must pay the entire balance every month (American
  Express).
• In this discussion we will be focusing on credit
  cards.

10
Credit Cards

• Most credit cards are unsecured.
• You do not have to provide collateral (homes,
  cars or savings and investment accounts).
• Collateral is what you promise to give the bank
  if you do not repay the loan.

11
Credit Card Offers

• Before accepting the offer look carefully at
  the terms.
• These offers are subject to verification of
  income, employment and credit history.
• Shop for the best possible deal!!

12
Credit Card Offers

• This means you will have to read the credit card
  agreement carefully.
• There may be limitations or conditions not
  obvious in the advertisement.
• They might encourage you to transfer balances
  from other credit cards (balance transfers) and
  there might be hidden costs with these
  transactions.

13
Credit Card Offers

• Before you decide to apply for a credit card,
  decide what it will be used for.
• It is a loan you must repay.
• CREDIT CARDS ARE NOT FREE MONEY!!!

14
Credit Card Offers

• How do you find the best credit card deals?
  (bankrate.com is a good place to start)
• Not all credit cards have the same terms. This
  can be confusing.
• What are some of the terms you might consider
  when searching?

15
Credit Card Terminology

• Annual percentage rate or APR. This is the rate
  of interest you are charged, plus fees, on a
  yearly basis. If you plan to keep a balance on
  your credit card account, you want to check out
  the APR. If you plan to pay your balance in full
  each month it would be more important to compare
  the annual fee and other charges.
• Fees. How much is the annual fee? Late fees?
  Over-the-limit fees?

16
Credit Card Terminology

• Grace period. The grace period is the number of
  days you have to pay your balance before a
  creditor starts charging interest.
• Balance computation method. This will determine
  how your interest is calculated. The most common
  method is the average daily balance.

17
Credit Card Terminology

• Interest rates. Can be fixed or variable.
• Fixed means the interest rate will not change.
• Variable means the rate can increase or decrease.
  
• You will need to understand how your payment is
  affected by the interest rate.

18
Carrying A Balance Can Be Costly

• Jane's average unpaid credit card bill over a
  year is 500, and her finance charge is 20
  percent (100). She pays a 20 annual fee plus a
  25 late fee (she was up late studying and forgot
  to mail in her check). Jane ends up owing 145 to
  her credit card company, and she still hasn't
  paid for any of her purchases!
• Yikes!

19
Debit Cards

• Debit cards have become the plastic of choice for
  many consumers.
• Debit card payments come out of a checking
  account immediately, alleviating concerns over
  credit card bills and interest rates.
• Because debit cards are linked to a checking
  account, they can limit purchases to items
  cardholders are able to pay for at that moment,
  unlike credit cards.

20
Debit Cards

• Debit cards may be a good option for those
  Americans that are carrying a debt load.
• But be careful not to overspend on a debit card,
  also, as doing so could result in insufficient
  funds fees (overdraft fees).
• Separately, using a debit card with overdraft
  protection means that debit charges can be paid
  out of your savings account or a home equity line
  of credit when your account becomes overdrawn.

21
Debit Cards

• If there is no account to withdraw money from to
  cover an overdraft there will likely be
  additional fees charged to the account.
• The fees can be connected to insufficient funds
  or, if the bank has an overdraft policy, the fee
  can cause the account balance to become negative.

22
Credit Card Traps To Avoid

• Trap 1 I can easily pay off my debt when I
  graduate or get a better job.
• Trap 2 As long as I make the minimum payment,
  I'll be fine.
• Trap 3 But I need that.
• Trap 4 Better late than never.
• kiplinger.com

23
Each Time You Make A Purchase Using A Credit Card

• Ask yourself????
• Is this worth borrowing money for?
• How long will it take me to pay for it?
• Remember the pizza
• Thank you and GOOD LUCK!