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Credit Cards

A

Difference between a credit and a debit card

Credit

VS

Debit

Cards

Watch the video discussing the differences between debit and credit cards

https://edpuzzle.com/media/5c1967b97b0b7f404c1c5edd

In a google doc

Explain the differences between debit and credit. Name one advantage and one disadvantage of each.

Assignment

There are two types of credit

Types of

Credit

Secured Credit

Secure

The product you purchased, such as a car, appliance or furniture, serves as collateral to guarantee the debt. If you do not make a payment, the creditor can legally take possession of the product.

Unsecured Credit

Unsecured

Unsecured credit is based on your promise and signature to repay the debt without committing your savings or other collateral as a guarantee. Credit cards can be either secured or unsecured. Most credit cards are unsecured.

Assignment

On the google doc

Explain the difference between secured and unsecured credit. Give an example of each.

Topic

Watch the following video that explains your credit statement

https://www.youtube.com/watch?v=cRA3nVHsY0M

Credit Statement

The following are items that can increase the amount you pay when you use credit

Cost of Credit

Annual Fee :

A yearly charge similar to a membership fee, usually ranges between $0 and $50.

Annual Percentage Rate:

Also known as APR is the cost of credit expressed as a yearly rate

Finance Charge:

The dollar amount paid to use credit. Includes interest and all charges associated with the transaction

Fees

Grace Period:

The number of days you have before a credit car company starts charging interest on new purchases. NOT ALL CREDIT CARDS HAVE A GRACE PERIOD

Periodic Rate:

The interest rate the card issuer applies to your outstanding account balance to figure the finance charge for each billing cycle.

Transaction Fees:

Some credit card issuers charge a fee for a cash advance, a late payment or exceeding your credit limit. There may be a monthly fee if you do not use your card.

Other

Information

Answer the question below on the google doc.

Assignment

What was the most important thing to remember according to the video?

List other fees that can be added to your credit card bill.

It is important to know how the interest rate is calculated.

The credit card company will use one of three methods:

  • Average Daily Balance Method
  • Adjusted Balance Method
  • Previous Balance Method

As you evaluate new credit card offers, look for the best deal for your current situation. As your financial circumstances improve, you may qualify for more favorable rates.

Calculate

Finance Charge

Average Daily Balance Method

This is the most commonly used method. You are given credit for your payment from the day the credit card issuer receives it and the interest is calculated on the basis of the average amount owed during the previous month.

Average daily Balance

Adjusted Balance Method

This method is the most beneficial to the consumer and produces the lowest finance charges. The balance is calculated by subtracting the payments and any credits from the balance you owe at the end of the previous billing period.

Adjusted Balance

Previous Balance Method:

This is the most expensive method. The finance charge is calculated on the balance owed at the end of the previous billing cycle. Payments, credits and new purchases made in the current billing cycle are not included.

Previous Balance

On your google doc

What method of calculating finance charge is the most expensive?

Assignment

Credit Card Evaluation

The following factors should be considered to help you select the best credit card:

  • The credit card interest rate
  • The balance calculation method
  • All charges and costs

Services and features available - such as rebates, cash-back incentives or extended warranties. These features should also be evaluated in terms of the extra credit costs to you.

Evaluation

look for a low interest rate but remember that the interest rate is not fixed.

Interest Rate

Service and features:

Rebates, cash-back incentives or extended warranties.

These features should also be evaluated in terms of the extra credit costs to you.

Services and Features Available

The balance calculation method - helps you determine the total cost of credit.

Balance Calculation

All Charges and Costs

All charges and costs

Some companies are adding other fees, such as late payment fees if your payment arrives after the due date or transaction fees every time you use the card.

Also grace periods are shrinking with some cards. Companies generally start the grace period at the time the purchase is posted to your account. However with some cards, the grace period can start on the day of purchase.

Responsibility

Some other responsibilities are:

  • Keep your cards with you or in a safe place
  • Do not give your credit card number to friends
  • Before signing receipts, verify for accuracy
  • Keep all receipts to check against the billing statement
  • Inform the credit card company immediately if you lose your credit card
  • Become familiar with the consumer credit laws that protect you.

You Pick

Take a look at three different credit card companies. (discover, american express, master card, visa, ect) Do not use store cards.

Choose one card from each company to compare and contrast which one would be the best fit for you.

On your google doc:

1. Show the three cards you picked

2. Compare what you think are the advantages and disadvantages of each.

3. Pick which one card you would like and explain why you want that one.

THE CARD NEEDS TO WORK FOR YOUR FIRST CREDIT CARD!

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