This document provides a basic overview of credit cards and credit. It discusses that a credit card is a loan based on a person's credit history and character. For those without credit history, income can be used to qualify for a first credit card. Credit cards differ from debit cards in that credit cards provide revolving credit with a monthly balance, while debit cards deduct funds immediately from a linked bank account. The document outlines factors that can help qualify for a credit card like good credit and a job, and explains how credit reports track payment history to determine credit scores. It warns that only paying minimum payments on credit cards can result in paying significantly more in interest over time due to compounding.

1. Basic Presentation on Credit and
Credit Cards

2. Credit Card Basics
A credit card is a loan that is based
on the character, or reputation, of
the person that holds the card.
How does the credit card company know
the character of the card holder? By
getting that person’s credit score or credit
history.

3. A credit card might also be given based
on a person’s wages, or what he or she
is paid at his/her job. This is a
common way that a young person,
who has no credit history, gets his or
her first credit card.

4. A credit card is not the same as
a debit card. Why not?

5. A credit card is not the same as
a pre-paid card, such as a CTA
card, an iTunes gift card, or a
Walmart Moneycard. Why not?

6. A credit card is what is called
“revolving credit.” This means that
the cardholder is given a credit
limit, which is used up when the
card is used but is restored when
payment is made.
We’ll talk about that more later.

7. How to Get a Credit Card?
• From a bank or credit union where
you have an account.
• From a bank or credit union where a
parent has an account.
• From a credit union where you work.
• On-line by searching for “credit card
application”

8. It will be easier to get a credit card
if you have (i) good credit character
and (ii) a job. A credit card is a
mixture of two types of credit –
credit based on character and
credit based on income, or pay.

9. It is easy to show that you have a
job – you just need a pay stub.
But how do you show good credit
character to a credit card company
that has never heard of you?

10. Every person who has ever had
credit, including even a data
plan, has a credit history that is
tracked by three companies. A
credit history is like a report
card for adults. A credit score is
like a GPA.

11. How do these companies know so
much about your credit?
What can you do to build a good
credit history and score?

12. What else can credit reports be used
for?
- Look for mistakes that may be giving
you a bad credit report and score;
- Look to see if you have been a victim
of identity theft;
- Look to see if a family member used
your Social Security number when
you were young.

13. How does a Credit Card work?
Charges on the card are billed once
a month.
Payment of the bill is due in about
25 days.

14. If you pay the credit card bill on-
time and in full, you will pay no
interest on the amount of the
bill.
THIS IS THE MOST IMPORTANT
LESSON OF THIS CLASS.

15. Instead of paying in full, you can
make a “minimum payment.” For
example, if the charges on the bill
add up to $100, you may be
allowed to make a minimum
payment of $20 and still be able to
use the card.

16. Minimum Payment – Good or bad
idea?
Minimum payments can make it
take a very long time to pay off
something, like a computer,
purchased with a credit card.

17. Example: Buying a $1,000 Laptop By
Using A Credit Card
What is the Real Cost of the Computer if the
Interest Rate is 18%?
–Minimum Payments of $100
• IT WILL TAKE 11 MONTHS TO PAY OFF
THE COMPUTER – TOTAL COST OF
$1,092
–Minimum Payments of $50
• IT WILL TAKE 24 MONTHS TO PAY OFF
THE COMPUTER – TOTAL COST OF
$1,198

18. Why is the total cost more than
the price of the computer?

19. What is compound interest?
It is like a snowball rolling down hill,
gathering more interest as it rolls, until
it gets so big that it crushes you.

20. What happens when the snowball of
compound interest crushes you?
• Judgment
• Wage garnishment
• Bankruptcy