Credit statistics

Credit statistics

Average college student has 4.25 credit cardsCollege seniors graduated with an average credit card debt of

more than $4,100.Close to one-fifth of seniors carried balances greater than

$7,000.Americans spend more than $1 trillion in credit every yearIn the last 12 months, 15 percent of American adults, or

nearly 34 million people, have been late making a credit card payment

8 percent (18 million people) have missed a payment entirely.One in 6 families with credit cards pays only the minimum

due every month.Only 45% of teens know how to use a credit card,Just 26% understand credit card interest and fees.

Image source: http://www.kokogiak.com/megapenny/thirteen.asp

Lesson 1

Credit

Credit- When a financial institution lends an individual money and trusts he or she will pay it back

Used to purchase items now and pay for them later

LenderPerson or organization with the resources to provide a

loan

BorrowerReceives money from the lender; pays it back with

interest or feesLesson 1

Credit

Credit is a source of revenue for financial institutions

Credit is not more money: it is tomorrow’s money

Why Do You Need Credit

Usually, you do not have the necessary amount of money in cash or in a bank account to pay for something, so credit helps you with the following…

5C’s: Qualifying for credit

In order to get credit, you need to QUALIFY for it1. Character

Are you honest? Will you repay?2. Capital

How much money are you worth?

3. Capacity Can you repay? Do you have a job?

4. Collateral What can the lender take away from you if you don’t pay?

5. Conditions What is the health of the economy?

Lesson 1

2.4.1.G1

© Family Economics & Financial Education – December 2005– Get Ready to Take Charge of Your Finances – Take Charge of Credit Cards – Slide 6

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Take Charge of Credit Cards

Lesson 2

2.4.1.G1



What is a Credit Card?

• Pre-approved credit– A financial institution determines

that they can lend you X dollars, and they believe you will be able to pay it back.

– Banks give them out!– http://www.dailymarkets.com/best-credit

-cards-2014/

Lesson 2

http://www.dailymarkets.com/best-credit-cards-2014/



2.4.1.G1



Credit Card Terms

• Credit card: pre – approved credit.• Interest- Fee for borrowed money• Credit Line/Limit – Highest amount of

money that can be charged to a credit card• Annual Percentage Rate (APR)- Interest

rate charged to the cardholder on the amount borrowed

• Finance Charge – Possible charges assessed to an account for credit card use

Lesson 2

2.4.1.G1



Credit Card Terms Continued

• Annual Fees - Fee charged once per year for credit card ownership

• Minimum Payment – Smallest payment that can be made on a credit card bill

• Due Date – Date payment is due• Late Payment Fee - Fee charged

when a cardholder does not make the minimum monthly payment by the due date

Lesson 2

2.4.1.G1



Advantages

– Convenient– Useful for emergencies– Often required to hold a

reservation– Purchase expensive items

earlier– Eliminate the need to carry

around large amounts of cash

Brainstorm 3 advantages of using a credit card

Lesson 2

2.4.1.G1



Disadvantages

– Paying interest– Additional fees are common– Tempting to overspend– Responsible for lost/stolen

cards– Identity theft is easier– Can cause large amounts of

debt

Brainstorm 3 disadvantages of using a credit card

Lesson 2

© Family Economics & Financial Education –Updated April 2009– Credit Unit – Understanding a Credit CardFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University

of Arizona

Interest• The price of borrowing money to make a purchase

and paying it later• Interest is referred to as the annual percentage

rate (APR)• Interest rate is charged per dollar borrowed per

year• Credit is often compounding interest which is

interest added upon interest each month based upon the amount charged

• The interest rate varies greatly between credit cards

Lesson 3

© Family Economics & Financial Education –Updated April 2009– Credit Unit – Understanding a Credit CardFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University

of Arizona

APRType of card Average APR*

National average 14.17%Cards with a low APR 12.04%Cards designed for students 13.87%Cards with airline or hotel rewards

14.43%

Cards for people with bad credit 19.50%* Source: 5/19/10 CreditCards.com Weekly Credit Card Rate Report

Lesson 3

http://www.creditcards.com/press-releases/CreditCards-Weekly-Credit-Card-Rate-Report-May-19-2010.php

2.4.1.G1



Safety Tips

1. Shred any unwanted credit card offers or credit cards received in the mail

2. Always check your credit card statement to make sure there are no false purchases

3. Sign card with signature and “Please See ID”

4. Do not leave cards lying around5. Close unused accounts in writing and

by phone, then cut up the card

Lesson 2

2.4.1.G1



Safety Tips continued

6. Do not give out account number unless making secure purchases

7. Keep a list of all cards, their account numbers, and phone numbers separate from cards

8. Report lost or stolen cards promptly

Lesson 2

2.4.1.G1



Remember….

• Only use a credit card when there is no doubt about ability to pay off the charges at the end of the month

Lesson 2

2.4.1.G1



What is a Debit Card?

• Plastic card that looks like a credit card• Electronically connected to your bank

account• Money is automatically taken from your

bank account when purchases are made• Requires a PIN (personal identification

number)– Confirms the user is authorized to access the

account

Lesson 2

Credit statistics

Documents

Transcript of Credit statistics