1. How do credit cards "work"? What are the advantages of using a credit card?
When you use a credit card, you are actually borrowing money from a credit card company.
Advantages: You don't have to carry cash. You can build a good credit score. You are able to get the benefit of incentives from the credit card company.
2. What are the negative consequences that consumers can fall into when using credit cards?
Debt
Lower credit score
Late fees
Paying interest
Interest is a percentage of the money you borrow that you will be charged if you don't pay the creditor back on time.
3. What is a credit limit?
A credit limit is the highest amount of money the credit card company will loan you.
4. Why do credit card companies set credit limits.
If people overspend, the money borrowed might not get paid back.
5. What is a minimum payment?
The minimum payment is an option for consumers to pay every month. BEWARE: Your payment covers a small amount of what you borrowed (principal). The rest of your minimum payment goes towards paying the interest you owe, now that you didn't pay the whole amount due.
6. Why shouldn't a consumer make only the minimum payment when it's time to pay their credit card bill?
Paying only the minimum payment will take longer to pay your debt down and by the time you pay your debt off, you will have paid far more money than what you originally borrowed. (What you originally borrowed is called "principal".)
7. What are the 3 rules for using a credit card wisely and avoiding debt?
1. Before you use your credit card, make sure you already have enough money in your bank account to pay your credit card bill when it arrives.
2. Every month, pay the full amount you owe.
3. Every month, pay your bill on time or early.
8. What is a Bank Card?
Bank cards include ATM cards and Debit Cards.
ATM cards and Debit Cards are used to withdraw, deposit, or transfer your own money from ATM machines.
Debit Cards also let you make purchases. Remember, the money comes straight from your personal bank account immediately after the debit card is used.
9. What is the major difference between money a consumer receives from using a bank card and money a consumer receives from using a credit card?
Credit cards are used to borrow money from a credit card company.
Bank cards are for using your own money from your own bank account.
10. How do credit card companies determine if a person is approved to get a higher credit limit or not?
A credit report is a statement that has information about the history of all the money you borrowed and if you paid it back on time. Creditors look at your credit history to determine how reliable you are.
11. What does it mean to co-sign a loan?
A co-signer is someone who will sign your loan knowing that they will be legally responsible for paying back your debt if you fail to do so. A co-signer will be the one whose credit score will go down if the loan is not payed on time.
12. Why would a person need someone to co-sign a loan?
A co-signer is needed when someone does not have enough credit history to show they are responsible to pay a loan. Also, a co-signer might be needed if someone has bad credit and needs help.
13. What is a credit score?
Your credit score is a three-digit number that relates to how likely you are to repay debt. If your credit history shows you are responsible for paying the whole amount every month on time or early, it will raise your credit score and you are more likely to be approved to borrow larger amounts of money.
14. How does a consumer achieve and maintain a high credit score?
They pay all their bills, loans, and other payments in full and on time or early.
15. Why do consumers need a high credit score?
Consumers are more likely to be approved to borrow larger amounts of money when they have high credit scores.
16. What would happen if someone couldn't pay back their car loan?
Their car will be repossessed. It is a process where an auto lender can take back possession of your car, sometimes without warning you in advance or having permission from the court. Repossession typically occurs after you fall behind on your auto loan payments.
17. Who is the person who is responsible for how you spend, donate, and save money?
When you use a credit card, you are actually borrowing money from a credit card company.
Advantages: You don't have to carry cash. You can build a good credit score. You are able to get the benefit of incentives from the credit card company.
2. What are the negative consequences that consumers can fall into when using credit cards?
Debt
Lower credit score
Late fees
Paying interest
Interest is a percentage of the money you borrow that you will be charged if you don't pay the creditor back on time.
3. What is a credit limit?
A credit limit is the highest amount of money the credit card company will loan you.
4. Why do credit card companies set credit limits.
If people overspend, the money borrowed might not get paid back.
5. What is a minimum payment?
The minimum payment is an option for consumers to pay every month. BEWARE: Your payment covers a small amount of what you borrowed (principal). The rest of your minimum payment goes towards paying the interest you owe, now that you didn't pay the whole amount due.
6. Why shouldn't a consumer make only the minimum payment when it's time to pay their credit card bill?
Paying only the minimum payment will take longer to pay your debt down and by the time you pay your debt off, you will have paid far more money than what you originally borrowed. (What you originally borrowed is called "principal".)
7. What are the 3 rules for using a credit card wisely and avoiding debt?
1. Before you use your credit card, make sure you already have enough money in your bank account to pay your credit card bill when it arrives.
2. Every month, pay the full amount you owe.
3. Every month, pay your bill on time or early.
8. What is a Bank Card?
Bank cards include ATM cards and Debit Cards.
ATM cards and Debit Cards are used to withdraw, deposit, or transfer your own money from ATM machines.
Debit Cards also let you make purchases. Remember, the money comes straight from your personal bank account immediately after the debit card is used.
9. What is the major difference between money a consumer receives from using a bank card and money a consumer receives from using a credit card?
Credit cards are used to borrow money from a credit card company.
Bank cards are for using your own money from your own bank account.
10. How do credit card companies determine if a person is approved to get a higher credit limit or not?
A credit report is a statement that has information about the history of all the money you borrowed and if you paid it back on time. Creditors look at your credit history to determine how reliable you are.
11. What does it mean to co-sign a loan?
A co-signer is someone who will sign your loan knowing that they will be legally responsible for paying back your debt if you fail to do so. A co-signer will be the one whose credit score will go down if the loan is not payed on time.
12. Why would a person need someone to co-sign a loan?
A co-signer is needed when someone does not have enough credit history to show they are responsible to pay a loan. Also, a co-signer might be needed if someone has bad credit and needs help.
13. What is a credit score?
Your credit score is a three-digit number that relates to how likely you are to repay debt. If your credit history shows you are responsible for paying the whole amount every month on time or early, it will raise your credit score and you are more likely to be approved to borrow larger amounts of money.
14. How does a consumer achieve and maintain a high credit score?
They pay all their bills, loans, and other payments in full and on time or early.
15. Why do consumers need a high credit score?
Consumers are more likely to be approved to borrow larger amounts of money when they have high credit scores.
16. What would happen if someone couldn't pay back their car loan?
Their car will be repossessed. It is a process where an auto lender can take back possession of your car, sometimes without warning you in advance or having permission from the court. Repossession typically occurs after you fall behind on your auto loan payments.
17. Who is the person who is responsible for how you spend, donate, and save money?