Unit 4: Lesson 1 Credit Card Costs

Key Terms:

Periodic Finance Charge

- Take the APR (annual percentage rate) and divide by 12 or 365
depending on if monthly rate is used or daily rate is used.

Open Ended

Why is it important to understand the terms and conditions before using a credit card?

Multiple Choice

Which of the following best describes the annual percentage rate (APR) on a credit card?

• The rate charged for purchases only

• The rate of interest charged on balances carried past the due date, cash advances, or balance transfers

• The fee for late payments

• The minimum finance charge

VISA® Variable Credit Cards Agreement & Disclosure - Los Angeles Federal Credit Union: Financing Your Future

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How it works

• Billing cycle ends: The credit card company closes your billing cycle and generates a statement with your total balance for that period.

• Grace period begins: The grace period starts after the billing cycle ends.

• Payment due date: The grace period ends on the payment due date, which is at least 21 days after the billing cycle closes.

• Paying in full: To keep your grace period and avoid interest, you must pay the full statement balance by the due date. 

A credit card grace period is the time between the end of a billing cycle and the payment due date, during which you can pay your balance in full without being charged interest on new purchases. To benefit from it, you must pay the entire statement balance by the due date, which is typically at least 21 days after the billing cycle ends. Grace periods generally do not apply to cash advances or balance transfers, which accrue interest immediately. 

​What is it?

Grace Period

Multiple Choice

What is a grace period on a credit card, and how does it affect finance charges?

• It is the time during which you can pay your balance in full to avoid finance charges.

• It is the time when you can make purchases without paying any fees.

• It is the period when you can transfer balances without any charges.

• It is the period when your APR is reduced.

Multiple Choice

Upon receiving his new card, the prime rate has increased to 9.3%. What is his new APR for using this card (find by looking at the variable rate information)

• 14.9%

• 2.9%

• 15.2%

• 23.9%

Multiple Choice

Chad missed his second payment due date. According to his terms and conditions, what will his new APR become? (i.e. Penalty Rate)

• 14.9%

• 15.9%

• 9.4%

• 23.9%

A credit card statement is a summary of your account's activity for a billing cycle, detailing transactions, payments, and credits, and providing information like the new balance, minimum payment due, and due date. Key sections include account information (like your name and billing dates), an account summary (previous balance, payments, new balance, credit limit), transaction history (purchases, cash advances, fees), and payment details.

​

Credit Card Statment

Drag and Drop

When you only pay the minimum payment on your credit card, you will have ​

Placeholder

on the remaining balance.

Drag these tiles and drop them in the correct blank above

interest

a grace period

assets

a gift card

New Balance =

Purchases and fees + finance charge + previous balance

= ___________ (a)



_______ (a) -- ________ (payments and credits) =


______________

Multiple Select

Which of the following are included in calculating the new balance on a credit card statement?

• Previous balance

• Purchases and fees

• Payments and credits

• Finance charges

Fill in the Blank

Midori Masami received the statement shown on the previous page. What is her new balance?

$

.

Multiple Choice

What is the total annual cost for using a credit card, considering membership fees, balance transfer fees, and monthly finance charges?

• Sum of all fees and charges for the year

• Only the membership fee

• Only the finance charges

• Only the balance transfer fee

Fill in the Blank

The yearly cost of borrowing money, including both the interest rate and any other associated fees, expressed as a percentage is called ___ ?

Open Ended

What is the significance of reading the credit terms and conditions before applying for a credit card?