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    Financial Freedom 2023 Editable Workbook-60-63

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    Financial Freedom 2023 Editable Workbook-60-63

    Uploaded by

    savinplaton35
    126 views4 pages

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    Financial Freedom 2023 Editable Workbook-60-63 (1)

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    126 views4 pages

    Financial Freedom 2023 Editable Workbook-60-63

    Uploaded by

    savinplaton35

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    WHAT IS A CREDIT CARD?

    What Do You Think?


    A credit card allows you to use the bank's money to make purchases that you must pay back.

    Credit cards allow you to use someone else’s money (the card issuer’s) to make purchases now, while you agree to
    pay the money back later. If you pay off the bill within the grace period, then you can avoid paying interest on your
    purchase. If you do not pay off the balance then the interest will start to add up, and this is where people run into
    financial problems. With a credit card you might be able to get a cash advance at an ATM but be careful because these
    cash advances are usually subject to a cash advance fee and, unlike purchase transactions, they begin to accrue interest
    charges immediately.

    • Advantages: Credit cards do have advantages such as helping to establish and build your credit history. They
    are convenient and safer than carrying around lots of cash. They can be a lifeline in an emergency when the
    unexpected arises. If someone steals your credit card and uses it without your knowledge, you cannot be held
    responsible for the charges if you report it in a timely manner, usually 48 hours. If you notice any fraudulent
    charges, you need to call the card issuer and report that your card was lost or stolen. They will have you file a
    dispute for all purchases you did not make. Once this process takes place, the charges should be removed from
    your account.

    • Disadvantages: The biggest disadvantage of a credit card can be the cost. Credit card interest rates are high
    in comparison to automobile loans and personal loans. Remember, they are unsecured loans in which the
    borrower isn’t required to provide collateral. Some cards also come with an annual fee, there can be fees
    imposed by the merchant, and late fees for missing a payment on time. In addition, the convenience can lead
    to impulse buying due to the ease in which purchases can be made, while the consequence is delayed until the
    next billing cycle. Credit card interest rates, as high as 25-30%, will be added to the unpaid balances making
    repayment even more challenging.

    We learned in Chapter 3 that credit cards are often confused with debit cards. Complete this chart to see what you know
    about credit cards and debit cards, placing a check in the box if the statement fits the description.

    Credit Card Debit Card

    Draws money from your bank account yes no


    Charges an interest rate yes no
    Can be used at ATM’s yes yes
    Can be used to shop online yes yes
    Allows you to use someone else’s money yes no
    Used to help build your credit score yes no
    Provides protections in case of identity theft/lost or stolen card yes no

    54 ©2023 Florida Council on Economic Education


    READING A CREDIT CARD STATEMENT
    Once you start using credit cards, your purchases and finance charges are counted against your set credit limit until they
    are paid. Each month, you will receive a statement for your credit card account that tells you how much you have in
    charges, how much you have paid, what finance charges you owe, and what your new balance is. Although statement
    formats differ, they always contain the following:
    1. Your credit card number: do not share it or someone else can use your account.
    2. The closing date: the date the credit card company created the statement.
    3. The amount of your credit line/spending limit.
    4. Available credit: the amount available to you that you haven’t used yet.
    5. Transactions section: a list of each charge and payment by date.
    6. Account summary: summarizes your transactions.
    7. Payment information: total amount you now owe or your new balance.
    8. Minimum payment: the least amount you can pay without a penalty. If you wish, you can pay more, up to the
    total. In fact, it is best to pay as much as you can to avoid interest! Many statements include a display of how
    much you would pay (plus interest) if you make only the minimum payment each month.
    9. Due date: after this date, the credit card company will begin charging interest on the amount you owe. Many
    companies also charge a late fee or increase your interest rate if you are late.
    10. Rate information: shows how the interest and fees are calculated.

    813.289.8489 • www.fcee.org 55
    Below you will find a sample credit card statement. Try and identify some of items listed on the previous page..

     BUILDING BLOCKS STUDENT HANDOUT

    Sample credit card statement


    Name: Susan Doe For Lost or Stolen Card, Call:
    Address: 1234 Main Street, Anytown, USA 1-800-XXX-XXXX
    Account Number: 12345-67-8907

    Payment Information
    Date: 12/30/XX
    Payment Due Date: 1/23/XX
    New Balance: $1392.71
    Minimum Payment: $25

    Account Summary Payment Information


    Previous Balance $482.42 New Balance $1,392.71
    Payment, Credits -$350.42 Payment Due Date 1/23/XX
    Purchases $1,258.56 Minimum Payment Due $25
    Cash Advances $0
    Balance Transfers $0
    Fees Charged $0
    Interest Charged $2.15
    New Balance $1,392.71

    Opening/Closing Date 11/27/XX – 12/26/XX


    Credit Access Line $12,000
    Available Credit $10,607.29
    Cash Access Line $2,000
    Available for Cash $2,000

    Past Due Amount $0


    Balance Over the Credit Access Line $0

    Finance Charge Summary Purchases Advances


    Periodic Rate 1.65% 0.54%
    Annual Percentage Rate (APR) 19.80% 6.48%

    BUILDING BLOCKS STUDENT HANDOUT 1 of 1


    Sample credit card statement Summer 2022

    56 ©2023 Florida Council on Economic Education


    SCHUMER BOX:
    The Schumer box is a summary of the costs of a credit card in the
    United States. It is named after Chuck Schumer, then New York
    congressman who was responsible for the legislation requiring
    that terms of credit cards be clearly outlined in any promotional
    material. Use the sample provided and answer the questions
    below to illustrate your understanding.

    (Note: the prime rate is set by major banks and it’s the very best
    interest rate banks would offer their most creditworthy borrowers,
    it serves as the baseline rate for credit card interest rates.)

    • Explain what the interest rates you will be charged are based on.
    based on your creditwothiness
    will vary with the market based on the Prime Rate

    • What fees are charged if you are late on a payment?


    3-5%
    late payment up to $40

    • What is a grace period and how long is the one mentioned?


    25d

    • What is the penalty for not having adequate funds in your


    checking account to pay the credit card bill?
    not charge you interesr
    cash advances on the transaction date

    • Why are interest rates on a cash advance higher than they are on
    store purchases?
    $10 or 3% of the amoun of each cash advance, whichever is greater

    • Based on what you have learned from this Schumer box, what are
    two warnings you would offer a friend about the use of a credit card?
    pay interest on time and have a good credit score

    813.289.8489 • www.fcee.org 57

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