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Financial Literacy

Financial Literacy

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 already charged – and not paid off $460 worth of stuff – then you go to spend $50, the card/ the purchase will be denied. That is, you will be asking for $460 + $50 or $510 of credit when you are only officially allowed to have $500 worth.

The skinny on credit limits:

• If a card is stolen, the thief can only charge up to the card’s limit. (By the way, the law says you are only liable for $50 of unauthorized charges on stolen or lost credit cards.)
• The bank limits its risk by setting the maximum a card holder can charge. That way if Deadbeat Dan doesn’t pay his bill, the bank has limited the amount it loses. For more on
• It’s a built-in limit on what Spendthrift Sammy can spend.

Anyway, you want Adele 21. The girl can sing. She costs $11.95 on iTunes, but you want the DVD so she’s $14; $17 with shipping. You fill out the form online; you get to the payment section and enter all your mom’s credit card numbers, the date the card expires (like the good till date on milk except that credit cards are usually fresh for a couple years). Plus, there’s this number on the back of the card that you have to give to prove that you’re holding that splendiferous rectangle in your hands, that you have the right to use the card.

So you make the purchase. Who gets what:

You (your mom’s the Cardholder): the DVD
Warner Records (aka the Merchant): $13.80
UPS (Shipper): $3
The bank that gave your mom the Visa (the Issuer): $0.20

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