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Financial Literacy

Financial Literacy

Home Financial Literacy Credit and Debit

Credit and Debit

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Plastic, and Rent on Money

“Plastic.”It’s a magic word. If you haven’t seen The Graduate, well, you oughta. In the film, “plastic” is the whispered key to all things good.Welcome to the land of Credit Cards. They...

"Rent" Money

It goes like this: • Interest is what you pay to borrow money. • What you pay is based on the amount you borrow. • You borrow $1,000. • The interest rate the bank’s going to charge...

How Credit Cards Came to Be

Part of the story of credit cards starts with a car: Ford’s Model T. Racing along at its top speed of 40 mph, it guzzled gas at 15 mpg. It was a revolution— Americans were now whizzing around...

Basic Anatomy of a Modern Card

The credit card of today has come long way, baby, from the credit coins of the 1920s. Credit cards have a thousand different looks. Maybe an image of Save the Socialist Dolphins or rocket skatebo...

How Credit Cards Work

Ok, the real scoop on credit cards starts with, well, trust, and a promise to pay. You really wanted that BMX bike that cost $200. You were willing to mow lawns all summer at $10 a lawn to pay for...

Buying Stuff

You get to use mom’s credit card for “cool stuff.” She has given you a budget of $80 a month to spend. It’s her basic Visa which has a $500 limit. That means that if you (or she) have alrea...

Paying for It All

The bank keeps a list of all your sweet buys throughout the month and then sends your mom the list (a statement) of how much you owe. Between your $80 budget and the things your mom charged, the c...

How the Money Flows

Marshall is at Best Buy looking at new printers. He decides on the scanner/printer combo and gets in line to pay for it. Here’s what happens: 1. Marshall swipes his MasterCard. 2. Best Buy’s...

Clive, the Clueless Mountain Climber

Meet Clive Clueless, a sophomore in college, who has made it his life’s goal to climb the Seven Summits (the highest mountains on each of the seven continents). At 20, he’s already checked Kil...

Clive Clueless' New Credit Card

• 18% APR (Annualized Percentage Rate)• No annual fee (The fee a bank charges for someone to have a credit card; like a membership fee, you pay it whether you use it or not.) • $3,000 credit...

A Few Months Later...

As it turns out, Clueless Clive is an internet gambling junkie. He’s up to his ears in debt from Guido, the loan shark who hangs out in the corner poolhall. Guido’s henchmen are threatening t...

A Wake-Up Call

Fortunately all of Guido’s ranting and raving was a wake-up call for Clive Clueless. He fesses up to his parents and gets into a Gamblers Anonymous group. To top it off, he has just discovered...

Making the Minimum Payment is a Bad Choice

Clive’s minimum payment is based on his balance and interest rate. Credit card companies typically require a monthly payment of at least 2%-4% of the card balance. Clive Clueless’ is “inter...

The Many Ways to Pay Electronically

It’s time to pay bills again, and Erica Easyway sits down at her computer. She checks out her monthly bill for cable and then clicks on the Pay Now button. What a slew of choices! She can pay...

The Flavors of Credit Cards

There are credit cards tailored to fit the deeper needs of virtually everybody: moms, dads, students, businesses, even little blue-haired ladies like Mildred. They all come in the standard shape a...

Debit Cards and Prepaid Cards

Debit cards are used the same way as credit cards, but rather than the credit card company paying for your purchase, the money gets taken out of your checking account right away. Ah ha, there’s...

PayPal

An alternative to credit cards for shopping online, people use PayPal for about 1/3 of all U.S. online purchases. You can send and receive money online with only an email address and a free-to-use...

So, What's a Good Rate?

It’s not so simple. A rate is not a rate is not a rate. There are fees, both annual and sometimes “just ‘cuz.” And there are all kinds of other potential liabilities that accrue when you fl...

A Range of Rates

• In 2012, the average credit card interest rate is 17%—some folks have lower rates, others have higher. • People with really good credit scores, a nice long solid history of paying their bil...

Interest Rates Can Get Hiked

A couple of years ago, Congress passed an act to make credit card companies behave more responsibly in the manner in which they treat people; to make sure they don’t deceive them about rates and...

Different Strokes for Different Folks

Also, there are different interest rates for different kinds of loans.Mortgages are probably the biggest loans most people ever get. Mortgage interest rates are the lowest because the bank gets t...

Credit Card Usage Today

In the 1950s, Diners Club started with a few hundred cardholders. In 2012, there are 160 million American credit cardholders. If you have a heartbeat and a job, it’s pretty easy to get a credi...

Many of Us Use Them

• Americans across all walks of life and most levels of income use credit cards o  Joseph, the welder in Wisconsin o  Everett, the evangelist in the Mississippi o  Caroline, the so...

Massive Amounts of Money Involved

• Around the world, every second of every day, 10,000 people pay for something with a credit card.• These days, folks in the U.S. are spending $75,000 every second on their credit cards (that...

OMG! We Owe HOW Much?

• The money Americans owe on our credit cards is staggering (so mind-boggling that Mark the accountant can’t stand up straight as he walks) at over $800 billion. Credits card debt is the third...

What the Facts Mean

• Credit cards are such a big part of the money landscape in America, we can hardly imagine a world without them. We’re using less and less cash…This old guy recently was asked by his little...

Payback Scenarios

The facts tell us that the average amount owed by all the Americans households that owe money on credit cards is $14,500. That’s almost five times what Clive Clueless, the intrepid mountain climb...

The Good, Bad and Ugly of Credit Cards

Credit in general is a useful concept. Say Adam wants to grow some wheat; all that fruit is backing him up and he needs some fiber. He goes to the snake to borrow a few bucks to buy some seed. I...

Banks and Stores

Hands down, the pros outweigh the cons for the companies that put out the cards.• Credit cards are an excellent way for banks and “financial institutions” to earn money.• They can charge th...

Not a Wise Choice for Financing College

College students are more likely than ever to use their credit card to pay their tuition. At a typical college, up to 25% of students use their credit cards. College is expensive, which is why so...

Understanding Your Credit Card Statement

Adapted from the Federal Reserve’s explanation of a credit card statement.http://www.federalreserve.gov/creditcard/flash/readingyourbill.pdf 1) Summary of account activity—Shows everything that...

The Balances Used to Calculate Your Interest

Adjusted BalanceYour adjusted balance is pretty simple to calculate:1. The month’s beginning balance is carried over from last month’s ending balance.2. Add any bodacious buys you’ve made tha...

Understanding Credit Reports and Scores

Yes, there is such a thing as your “Permanent Record.” It’s called a credit score. The three major credit bureaus come up with a score for the likelihood that you’ll pay back any money yo...

How Your Score is Calculated

Software is used to calculate credit scores based on the information in your credit report. The formula is based on a changing mix of the things shown in this chart: • Payment history• Amounts...

Fraud and Identity Theft

Every year, several million Americans are hurt by credit card fraud.Last year, Evelyn, a 75 year-old from Des Moines replied to a plea she received in an email from her friend, Mary. Evidently Mar...

Shopping for a Credit Card

Maria will be graduating from CalTech soon. She managed to keep a 4.0 through the whole four years she’s been there. She has a job lined up at NASA’s Jet Propulsion Lab where she’ll make me...

The Fine Print

Just for fun, here’s the fine print from a card Maria’s considering. It’s a Discover with a 5% cash-back bonus program. She really likes the higher cash back percents, but is a little leery...

Maria's Decision

Maria decided to get a Capital One® Cash Rewards card because she could earn unlimited cash back in the form of Reward Dollars (3% cash back at supermarkets, 2% cash back at gas stations and depar...

Applying for a Card

Maria found the application process a breeze doing it online. She just entered the info they asked for in the boxes. • Her name, address, contact info, and social security number. Social securi...

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