banking basics + credit cards

to open a bank or credit union account in person, people need:

two forms of identification such as social security card, state-issued drivers license, passport, or birth certificate

each bank account is protected up to

$250,000

make sure that any bank at which you open an account is a member of

Federal Deposit Insurance Corporation (FDIC)

make sure that any credit union at which you open an account is a member of the

National Credit Union Association (NCUA)

True or false: online only banks provide online banking services; banks and credit unions do not

False

What is something important to consider when choosing a bank or credit union for a checking account?

whether there are monthly fees or minimum balance requirements

What are you not guaranteed by having a bank or credit union account?

a loan

it is important to manage your bank or credit union account by checking

that deposits made to your account and payments made from your account are accurate

it is important to make sure deposits and withdrawals are accurate so that you can

avoid paying overdraft fees and make certain records and account balances are accurate

True or false: online banks have physical building that you can go to if needed

False

banks

businesses that accept deposits and make loans

credit union

a nonprofit financial institution that is owned by its members

debits

charges to or withdrawals from an account. subtracted from the balance

credit

but something with someone else’s $ in exchange for a promise to pay for it at a future date

lender

person or organization that provides the loan; bank, credit

borrower

person who get the money on as a loan

creditworthiness

ability and willingness to pay money back

principle

the amount of money you borrow

interest

the cost to borrow money

revolving credit

• open ended loan as long as you pay it back

• can be repaid in one month or over many years

• borrower chooses how much to pay each month

• Credit limit

minimum payment

lender requests a small % per month

APR

• annual percentage rate

• national average of 16.6%, can go up to 30%

• 24% means 2% per month

• APR only matters if you DO NOT PAY OFF YOUR BALANCE

benefits of credit cards

convenient; emergencies useful; required for reservations; big purchases can be spread out; positive credit rating; bonuses and rewards; immediate purchasing power; no need for cash; bills can be consolidated; zero liability on fraud

risk ms of credit cards

it’s a loan; interest makes more purchases more expensive; identity theft threats; multiple accounts lower credit score; interest rate may go up; may include additional fees; can be easy to overspend; can promote impulse buying; very easy to fall in to debt

safety tips

• sign your credit card (C I D)

• Never give out credit card #

• report lost or stolen immediately

• shred pre approvals

3 C’s

character, capacity, and capital

character

the way you handle money and have repaid debt in the past

capacity

your ability to pay the debt after considering over monthly expenses

capital

the value of your affect or what you own

credit marketing

credit companies prey on youth

FICO

Fair Isaac Company; range between 300-850; US average of 698; subprime < 600

why do I need a good credit score

• significant savings on interest rates on big ticket loans

• better terms and availabilities on loan products

• access to the best credit cards

• insurance discounts

• more housing options

• security deposit waivers on utilities