Young People & Credit Cards

Types of Credit: Young People & Credit Cards

Bellringer Question

  • Is it a good idea for high school students to have a credit card? What about college students? Adults? Why or why not?

Comparing Cards

  • Before deciding whether to open a credit card, understand how it differs from a debit or prepaid debit card.
  • Comparison chart is filled out as a class after watching the video.

Comparing Cards Chart

  • Debit Card
    • Where does the money come from? Checking account.
    • Fees? Low: ATM fee, Overdraft, Cash Back fees.
    • Legal protection/Replacement? Legal protection. Replaceable. 50 responsible for in fraudulent charges.
    • Builds Credit? No.
    • Rewards? No.
    • Best for… Day-to-day purchases.
  • Credit Card
    • Where does the money come from? Bank (it’s a loan!).
    • Fees? Medium: Interest rate, late payment, annual fee, cash advance fee.
    • Legal protection/Replacement? Replaceable. 50 responsible for in fraudulent charges.
    • Builds Credit? Yes.
    • Rewards? Yes.
    • Best for… Bigger purchases. Travel.
  • Prepaid Debit Card
    • Where does the money come from? The money you load on the card.
    • Fees? High: Maintenance, Reload, Activation, Transaction.
    • Legal protection/Replacement? No legal protection. No replacement.
    • Builds Credit? No.
    • Rewards? Maybe/No
    • Best for… Travel. Gifting.
  • Which of the three cards is the best option for your day-to-day payment method? Explain why.

Infographic: What Young People Need to Know About Credit

  • Focus on two sections:
    • Why Credit Is Useful
    • How Young People Get Credit

Questions

  • Why might young adults, in particular, value credit in case of emergency?
    • Many may not yet have the funds in their savings or other accounts.
  • If you’re trying to gain access to a credit card before you turn 21, which of the suggestions rely on the support of a parent or guardian?
    • Co-signer
    • Becoming an authorized user on their account.
  • Which of the suggestions do NOT rely on the support of a parent or guardian?
    • Obtaining a secured credit card.
    • Start to develop a credit history by paying back your student loans while still in school.

Video: Things to Consider When Applying for a Credit Card

  • Assume you’re going to open a credit card – and you have a plan for how you’ll qualify for one.
  • There are thousands of cards available to choose from. How should you decide which one is best for you?
  • Four important factors:
    • Annual fee
    • APR
    • Penalty fees and rates
    • Grace period

Questions

  • Which of the four factors directly impact your total cost of using the credit card?
    • Annual Fee, APR, Penalties
  • Simon is planning to open a credit card, charge only his monthly streaming service subscriptions (less than 50 per month), and pay his entire bill in full each month so that he never has to pay interest. Which of these factors do you think is most important for Simon to consider when selecting a card? Why?
    • He should get a zero annual fee card so he will wind up paying nothing while at the same time building his credit history.
  • Delara is opening a credit card because her budget is really tight right now and she’s struggling to pay all of her expenses based on her income.
    • Why might a card with a long grace period be in her best interest?
      • It appears that her cash flow may be inconsistent therefore she may need extra time at the end of the statement period to make her minimum payment.
    • She knows she’ll be making only the minimum monthly payments each month until she can find a job where she’ll earn more income. This means some of her payment every month will go toward paying interest rather than paying down her principal. What other factor(s) might be most important to Delara? Why?
      • She will need to get a card with a low APR to avoid paying more interest than she needs to.

TPOM - Chapters 10 & 11

Key points from the chapters:

  • One of the keys in Chapter 10, “Save Money” is that you can increase your savings rate by controlling your spending. As an adult, how would you go about doing this?
  • When I was in college, I was told to take all emotion out of my investments….that we shouldn’t fall in love with a company’s stock that we own. According to Chapter 11, why might this not be a great strategy?

Activity: Fine Print - Schumer Box

  • Each of the factors you saw in the previous video are provided in something called a Schumer Box, which is meant as a written summary of the most important terms and conditions of a specific credit card.
  • Follow the directions on the worksheet to complete this activity. Schumer Box Assignment