What is Credit?
What does the term "credit" mean?
Borrowing money now and paying it back later.
What is meant by "credit limit"?
A card that lets you borrow money to buy things and pay later.
What is interest?
The extra money you pay when you borrow money and don’t pay it back right away.
making monthly payments in full on your credit card.
Smart! You avoid interest and build credit.
True or False: Credit is free money.
False. You have to pay it back, often with interest.
What happens if you don’t pay your full credit card bill?
You get charged interest.
Which is preferable, a credit card with high or low interest?
Low! That means you pay less extra money.
Using your entire credit limit to purchase concert tickets.
Not Smart. It hurts your credit and can lead to debt.
Name one reasons people use credit.
To buy big things (like cars), to handle emergencies, or to build credit history.
Which advantage comes with using a credit card?
You can build credit, earn rewards, or use it for emergencies.
If you pay your credit card bill in full, how much interest do you pay?
None.
Using credit for an emergency car repair.
Smart—as long as you have a plan to pay it back.
A lender: what is it?
A person or company (like a bank) that gives you credit.
What’s one risk of using a credit card?
Overspending or going into debt.
What does APR stand for?
Annual Percentage Rate (the yearly interest rate).
500
making only the monthly minimum payment.
Not Smart. You’ll pay more in interest.
What does the term "credit limit" mean?
The maximum amount of money you can borrow on a credit card.
How much is the minimum credit card payment?
The smallest amount you must pay each month to avoid late fees.
You take out a $100 loan that you never repay. It is 20% APR for you. One year later, how much interest do you owe?
$20.
learning how to manage your finances with a debit card before obtaining a credit card.
Smart! Great way to build good habits first.