Credit Cards
Megan Stearns,
Credit Counselor
Agenda
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What is a credit card?
Types of credit cards
Shopping for a credit card
Advantages and disadvantages
Using credit cards wisely
Fraud
What is a credit card?
• A credit card is a loan
• No set time to be paid back
• There’s a pre-determined credit
limit
• Money spent can be paid back in full or in
installments
• Anything not paid back in full is assessed a
finance charge
What is a credit card?
• Loan
– A credit card has an interest rate
• Fixed
– Rate can still change, as long as the credit card issuer notifies
you
• Variable
What is a credit card?
• No set time to pay back
– Revolving line of credit
– Payment options
• Pay off in full each month
• Make minimum payment each month
– You will be assessed a finance charge
What is a credit card?
• Credit limit
– The maximum amount of money you can spend
– May be fees or interest rate increases for going
over your credit limit
Types of Credit Cards
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Bank card
Store card
Secured card
Charge card
Types of Credit Cards
• Bank card
– Can be used anywhere
– Backed by Visa, MasterCard, American Express,
Discover, etc.
– Typically have better interest rates
– Usually have a rewards program based on cash
back, points or miles
Types of Credit Cards
• Store card
– Can only be used at a specific store
– Unique rewards program
• Discounts at the store
• Special coupons
– Easier to obtain
– Usually have higher interest rates
Types of Credit Cards
• Secured card
– Card is secured by your money
– Usually has a lower limit
– Usually has a higher interest rate
– Good option for individuals with no credit or bad
credits
Types of Credit Cards
• Charge card
– No preset spending limit
– Balance must be paid in full at the end of the
month
– Usually an American Express card
Shopping for a Credit Card
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Type of card
Fee schedule
Grace period
Annual Percentage Rate (APR)
Finance charge
Credit limit
Monthly payment
Rewards programs and cardholder benefits
Shopping for a Credit Card
• Fee schedule
– Annual fee
– Late payment fee
– Over limit fee
– Cash advance transaction fee
– Balance transfer fee
Shopping for a Credit Card
• Grace period
– Time before interest is charged
– Typically 10-25 days
– Not offered when there is an unpaid balance on
the card
– Not offered on cash advances or balance transfers
Shopping for a Credit Card
• Annual Percentage Rate (APR)
– Yearly rate of interest
– Must be disclosed to borrower
• Finance charge
– Monthly charge for carrying a balance on a credit
card
– Added to card balance
Shopping for a Credit Card
• Rewards programs and cardholder benefits
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Extended warranties
Price matching
Coverage for damaged or stolen products
Rental car insurance
Cell phone replacement
Travel insurance
No baggage fees
Free admission
Free currency conversion
Shopping for a Credit Card
• Purdue Federal Rewards Visa Cardholder
Benefits
– Travel Benefits
• Travel accident insurance
• Concierge service
• Travel & emergency assistance
– Auto rental collision damage waiver
– Warranty manager service
– Cell phone protection
Shopping for a Credit Card
• Purdue Federal Rewards Visa Cardholder
Benefits
– Other Protection
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Auto rental collision damage waiver
Warranty manager service
Cell phone protection
Fraud resources
Visa checkout
Zero liability
Shopping discounts
Shopping for a Credit Card
Credit Card Advantages
• Convenient
• Immediate: Use of item now
• No need for cash
• Zero liability on fraud
• Spending record
•Rewards program
Credit Card Disadvantages
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Can be easy to overspend
May include additional fees
Interest rate (APR) may go up
Can be lost or stolen – risk of fraud
Credit history damaged if misused
Using Credit Cards Wisely
• Keep track of your spending
– Save receipts
• Pay your bill on time
– Avoid late fees
• Pay in full every month
– Avoid charging more than you can pay off at the
end of the billing cycle
• Don’t exceed the credit limit
Using Credit Cards Wisely
• If you can’t pay cash for something you
shouldn’t be putting it on a credit card
• Purchase items you would normally buy
anyway
– Gas, groceries
– Use as a convenience tool, not a loan
• Don’t use a credit card as an emergency fund
Using Credit Cards Wisely
• Credit card balance : $1,000
• Interest rate: 24.99%
• Minimum monthly payment: $25.00
• Total finance charge: $1,174.05
• Number of payments: 87 months OR
7.25 years
Using Credit Cards Wisely
• Interest rates matter!
• Credit card balance: $1,000
• Minimum monthly payment: $25.00
Interest Rate
Total Interest Paid
Months to Pay Off
Credit Card A
9.5 %
$ 207.42
49
Credit Card B
15.5 %
$ 416.77
57
Credit Card C
17.5 %
$ 512.44
61
Protect Yourself from Fraud
• Never leave receipts lying around
– Shred old receipts, bills and unwanted card offers
• Protect your credit history
– Review your credit report
– annualcreditreport.com
• Review statements carefully
– Immediately report any discrepancies or errors on
the monthly statement
Protect Yourself from Fraud
• Report a lost or stolen card immediately
• Protect personal information
– You should never give out your credit card number
unless making a telephone, mail order, or online
purchase
• Do not let anyone else use your credit card
and do not charge purchases for other people
Questions?
Megan Stearns
Email: [email protected]
Phone: 765.497.7455
Website: PURDUEFED.COM
Student Blog: PURDUEFED.COM/STUDENTS