5.3 Young People and Credit Cards

What happens when you use your debit card?

• You pull money directly from your savings account.

• You pull money directly from your checking account.

• You are borrowing money from your bank to make a purchase.

• You are buying an item/service now with the promise to pay later.

A key difference between a debit and credit card is…(choose 2)

• You can pay interest when using a credit card, not with a debit card.

• You can pay interest when using your debit card, not a credit card.

• You can build a credit score when using a credit card responsibly, not with a debit card.

• You can build a credit score when using a debit card responsibly, not with a credit card.

If you’re trying to gain access to a credit card before you turn 21, which of the suggestions rely on the support of your parent or guardian? (choose 2)

• Getting a cosigner

• Getting student loans

• Getting a secured credit card

• Being added as an authorized user

Which of the suggestions do NOT rely on the support of a parent or guardian? (choose 2)

• Getting a cosigner

• Getting student loans

• Getting a secured credit card

• Being added as an authorized user

Why is credit useful? (choose 3)

• Convenience

• Building credit

• Emergency

• To make you feel cool

• Because it is free

What is a secured credit card?

• The borrower puts down a security deposit that doubles as the credit card’s limit. They make purchases as they would with a regular credit card, and they’re responsible for paying at least the minimum balance on time every month. As long as they do so, their account will stay open, they build credit, and their security deposit remains untouched.

• A credit card that does not require a security deposit for approval, the debt is not secured by collateral that the lender or card issuer can keep if you fail to make payments.

• A lump sum of money that you receive up front and pay back the principal and interest over time in installments based on the agreed term.

What are 2 reasons someone might want to open a secured credit card?

• They are unable to open a unsecured credit card because they have bad or limited credit history

• A secured credit card is basically a debit card

• They don’t need support of a cosigner or someone willing to add them as an authorized user

• They can earn interest since the card is secured

What is a credit score?

• Summarizes your credit history based on your financial behavior

• The total amount of money you can borrow

• The percent charged on the amount you own

• Amount owed on an existing line of credit

• A detailed list of your credit usage history

What is a credit limit?

• Summarizes your credit history based on your financial behavior

• The total amount of money you can borrow

• The percent charged on the amount you own

• Amount owed on an existing line of credit

• A detailed list of your credit usage history

What is an interest rate?

• Summarizes your credit history based on your financial behavior

• The total amount of money you can borrow

• The percent charged on the amount you own

• Amount owed on an existing line of credit

• A detailed list of your credit usage history