Should I get a credit card?
Marcus graduated college last year, and works full time as a nurse at his local hospital. He opened a credit card for free hotel points, but has no other cards. Additionally, he has a good amount of money in his savings account, and has never had to worry about over drafting it. Should Marcus get a credit card?
Yes
An open line of credit that can be used for any purchases as long as you’re under the credit limit.
Credit card/ revolving credit
The interest rate remains constant during the duration of the loan.
Fixed Rate
What is an installment loan?
When the borrower pays back the loan over a fixed amount of time.
Poppy is in her senior year of college, and loves to party. She has never had her own credit card, just one from her parents with her name on it. She loves to spend money, and has issues with spending more than what’s in her checking account. Should Poppy get a credit card?
No
A set amount of time after a due date when a payment can be made without penalty.
Grace Period
The interest rate can change during the duration of the loan based on the prime or index rate.
Variable Rate
What are some benefits of a credit card?
(You only need 1!!)
Rewards, convenience, and can build your credit score.
Annie is a college dropout who is financially supported by her parents. She used to have major spending problems, which is why her parents never wanted her to open a credit card. However, 6 months ago, Annie got a job, and began following a stricter budget. She was able to save enough money to get a small apartment, and hasn’t been late on the payment so far. Should Annie get a credit card?
Could go both ways
What the borrower owes for the loan.
Interest (APR)
Debt is tied to a specific asset that can be used as collateral and repossessed if the borrower doesn’t make payments.
Secured Loan
What are the disadvantages of a credit card?
(You only need 1!!)
Fees, convenience, and can lower credit score if you default on a payment.
Mary is a college student who has her tuition paid for by her parents. However, she is responsible for covering the costs of her own room and board. Mary is a responsible spender, with a part-time job at Menards. Should Mary get a credit card?
Yes
amounts of money that are due, but which have not yet been paid and are owed to the creditor by the debtor.
Outstanding balance
debt is not tied to a specific asset; there is no collateral that can be taken if the borrower defaults.
Unsecured Loan
What is APR, and what do the letters stand for?
APR is the annual percentage rate, and it is the yearly cost of borrowing money as a percent.
Trevor is a college graduate with lots of student loan debt, and a history of spending issues. He has a job, but only works twenty hours in any given week. To cut down on costs, Trevor chose to move back in with his parents after college. His parents have him pay monthly rent at a low cost to teach him accountability, and he hasn't defaulted on a payment yet. Should Trevor get a credit card?
Could go either way
The smallest amount of money that you must pay toward your bill each month to avoid late fees and penalties.
Minimum Payment
A number that estimates how likely you are to repay debt and make payments on time. It's a key factor in determining whether you're approved for credit, and the interest rate you'll be charged.
Credit Score
What is a monthly payment?
A monthly payment is the amount of money paid each month to repay a loan or other type of debt