financial literacy series: cards and same-day loans · same-day loans janet sodell, curriculum...
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Reading Activities for Smart Financial Choices
Financial Literacy Series:
Cards and Same-Day Loans
Janet Sodell, Curriculum Development | Nausha Brown Chavez, Editor
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The READ Center developed the financial literacy series to equip students with the knowledge and skills they need to manage money effectively.
Financial literacy includes understanding how a checking account works, what using a credit card really means, and how to avoid debt.
Financial literacy is the first step to financial well-being.
DID YOU KNOW
l Gift cards are not always a good thing.
l Payday loans and car title loans are not good ways to find money in a hurry.
IN THIS BOOK, YOU WILL BE LEARNING:
l How gift cards work.
l The different types of same day loans.
l How to read credit card info and statements.
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CARDS AND SAME-DAY LOANSGift Cards
RETAIL GIFT CARDSfrom a specific store or
restaurant. These cards canonly be used at those places.
BANK GIFT CARDS have a logo like American Express, Visa, Mastercard, Discover.These cards can be used anywhere that accepts credit cards.
THERE ARE TWO TYPES OF GIFT CARDS:
Read the fine print and look for the following:
l Is there a fee to buy the card?
l Is there a fee to use the card?
l When will the card expire?
l Are there inactivity fees?
l When do inactivity fees start?
l Is there a fee to replace a lost or stolen card?
l Is there a way to check the balance and is there a fee?
NOTE: Using gift cards does not help your credit.
Before buying the card:
l Buy from a place you know and trust.
l Read the fine print.
l Look at the card. Have stickers on the back been removed? If so, don’t buy it, but do tell the store.
After you buy the card:
l If it is a gift, give the original receipt that shows where you bought it also.
l Use gift cards as quickly as possible.
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EXAMPLE:You need $300.00 for car repairs. You go to the payday loan store and write a check for $330.00 and the check is dated for when the loan is due. The extra $30.00 is for the fee. When the loan is due, you give the store $330.00 or let them deposit the check you wrote when you got the loan.
Payday LoansPayday loans are also called cash advance loans or check advance loans. People use them when they need cash fast and for a short time.
Loans can be from $50.00 to $1000.00. Different states have different levels. You usually borrow money for two weeks. You must pay a fee every time you get a payday loan. The fee can be between $10.00 and $20.00 for every $100.00 you borrow. If the fee is $15.00 per $100.00 and you borrow $200.00, you will have to pay a $30.00 fee. If you were to borrow every two weeks, this would be like paying an annual percentage rate (APR) of 400% on the loan!
To get a loan, you go in the payday loan store and give them some information about your finances. Having good credit is not needed to get a payday loan. The lender decides how much you can borrow and when you need to pay it back. You write a check to the lender for the amount of the loan plus the fee. The check is dated for the date the loan is due.
When the loan is due you need to give the lender the cash you borrowed plus the fee or let them deposit the check you wrote when you borrowed the money.
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WHAT ARE THE BENEFITS?
l Fast and easy money.
l Doesn’t require a credit check.
l Helpful for people without a credit card or savings.
WHAT ARE THE NEGATIVES?
l More expensive than credit cards, personal loans or borrowing from family.
l A late fee may be less expensive than the payday loan fee.
l It is very easy to get in the payday loan trap where you keep borrowing the same amount of money and the fees keep adding together!
WHAT CAN YOU DO INSTEAD?
l Borrow from friends or family.
l Use a charge card.
l Use money in your savings account.
l Apply for a regular loan at the bank.
l Ask your employer for an advance.
What happens if you do not have the money to pay the loan back? You can take out a new payday loan for $330.00 (the original loan and the original fee). Now you would write a new check for $379.50 because you must to pay the service fee on the new loan amount.
All of a sudden, instead of paying $30.00 to borrow $300.00, you have to pay $79.50 to borrow the same $300.00!
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Car Title LoansCar title loans work a lot like payday loans but instead of writing the company a check they can cash later, you give them the title to your car.
Loans can be from $100.00 to $5,500.00. You usually borrow the money for 15 to 30 days. Like payday loans, they also charge a fee for the loan. This fee is also very high if you keep rolling over the loan for an entire year! Some companies may put a GPS tracker on your car. This is in case you are thinking of hiding your car instead of paying off the loan.
If you do not pay the loan off on time, the company can repossess your car. They will then sell it to get the money you owe them. To keep the company from repossessing your car you need to pay the loan off in time or take out another title loan. Like rolling over a payday loan, the fees you pay for the second car title loan are even higher than the first time.
CAR TITLE
CHARACTERl Are you honest and
reliable?l Do you pay your bills on
time?l Do you have a good credit
report?l How long have you lived at
your present address?l How long have you been
at your present job?l Will you repay the debt?
CAPITALl Do you have valuable
assets?l Do you own property?l Do you have a savings
account?l Do you have
investments?
CAPACITYl Can you repay the
debt?l Do you have a steady
job?l Do you earn enough
to support your credit use?
l How many other debts do you have?
l How many dependents do you have?
THE THREE C’s
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WHAT IS CREDIT AND WHY DO YOU NEED IT?Some day, you will probably want to get a loan for a car or a house. To qualify for a large loan, you will need to have a credit history. In other words, you will need to show a history of borrowing money and paying it back. Banks and other financial institutions want to know that you are a “low risk” when they lend you money. They want to be as sure as possible that you will pay the money back.
There are three principal ways to establish a credit history:
1 CREDIT CARDS:
If you make purchases with a credit card and always pay the money back, the bank feels confident that you will pay back other types of loans. A credit card is an excellent way to show you are a low credit risk for a bank. But, sometimes, people with no credit history in the United States have trouble getting their first credit card. If that is the case, you can get a “secured” credit card. With a secured credit card, you give the bank a deposit. Then, they are sure you will have the money to pay your credit card bill. Later, you can apply for an “unsecured” credit card. You don’t have to make a deposit.
2 LOANS:
If you have received a loan from a bank or another business and you demonstrate that you paid it back, the bank will
probably trust that you will pay back other types of loans.
3 NON-TRADITIONAL WAY:
If you don’t have credit cards or loans, you can still get credit. You usually need to provide documents proving you have a stable work history, and records from your landlord and utility companies showing you pay your rent or other bills on time. If a family member or friend gave you a loan and you paid it back, you can ask them to write a letter.
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Every credit card offer or invitation must include the “terms,” which are the rules and information that you need to decide if it is a good opportunity for you. This information is often written in very small letters and placed on the back of the offer. This is the most important part for you to read!
#### 42356752980 8777083 KNBVMarco Simponi 8679 3rd AvenueLos Angeles, CA 92345-4337
Dear Marco Simponi,
You have been invited to save with a low annual fee Visa Gold card. It’s not everyday that you can get a card like this one. It saves money in interest and therefore gives you more cash to spend each month.
Plus, it comes with a special APR of 2.9% on purchases until May 1st, 2020, and a low annual fee of only $25.
Get up to $3000 in new creditAnd you could earn more credit in just a few months. In the meantime, you can use your new card to shop anywhere that accepts Visa (more than 20 million locations).
Simply return the form belowThere’s no application fee, so you send no money to apply. Just �ll out the Acceptance Certi�cate and mail it back in the enclosed envelope. Or, if you want to receive your card faster, call us now toll-free at 1-800-678-1900.
Sincerely,
Mark SchallBusiness Manager
P.S. Remember, your Visa Gold card comes to you with a special introductory APR of 2.9% on purchases until May 1, 2020 and a low annual fee of $25. Return your application or call us now so you can enjoy the bene�ts of your new card.
You are pre-approvedFor our new Visa cardJust �ll out the application and
mail it before August 21, 2019!
2.9% APRon purchases
until May 1, 2020
Get up to $3000 in new credit
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Visa Credit Card Terms:
After you read a credit card invitation and the terms, make sure that you understand all of the vocabulary and rules. Sometimes a credit card offer will say one thing, but it means something different. Read this explanation of the vocabulary and terms from the invitation.
Annual Percentage Rates Promotional rate of 2.9% on purchases until May 1st, 2020. After May 1st, 2020: Purchases: 13.99%Cash advances: 20.00%If you do not follow the Terms: Up to 23.99%
Grace Period 25 days, but none on balance transfers
Annual Fee $25
Minimum Finance Charge 50 cents
Transaction Fee for Cash Advances
3% of the amount of each cash advance, but not less than $10
Transaction Fee for Balance Transfers
3% of the amount of each balance transfer, but not less than $10
Transaction Fee for Late Payments
$29
Over-the-Credit-Limit Fee $29
WHAT IT SAYS: WHAT IT REALLY MEANS:
2.9% APR on purchases until May 1st, 2020
The APR, annual percentage rate, is the average interest rate that you will pay for the whole year. 2.9% is a very good and low rate. Unfortunately, this good rate is only valid until May 1st, 2020. After that, it will increase to 13.99% or higher.
1. The interest rate in June 2020 will be 2.9%. TRUE FALSE
2. The interest rate can go higher than 13.99% in the future. TRUE FALSE
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WHAT IT SAYS: WHAT IT REALLY MEANS:
A low annual fee of $25
The annual fee is what you pay once a year to use the credit card. $25 is a low fee, but many credit card companies have NO annual fee.
3. The annual fee is paid one time when you first get the credit card. TRUE FALSE
4. Some credit cards do not charge an annual fee. TRUE FALSE
Grace period: 25 days
The grace period is the time that the company gives you to pay off your debt without paying interest. For example, if you use your credit card to buy a new TV for $200 and you pay back the credit card company before the grace period ends, you don’t have to pay interest. Most grace periods are 25-30 days.
5. You must always pay interest when you use a credit card. TRUE FALSE
6. A typical grace period is 45 days. TRUE FALSE
Transaction Fee for Cash Advances
When you use your credit card to get cash, this is a cash advance. There is an extra fee for cash advances. Cash advances often have a higher interest rate than purchases.
7. You can use a credit card to get cash. TRUE FALSE
8. You don’t pay interest on a cash advance. TRUE FALSE
Over the credit limit fee: $29
Your credit limit is the total amount of money that the credit card company will permit you to spend with your credit card. A person who receives a new credit card might have a low credit limit of $500. A person with a good credit history might have a credit limit of $10,000. If you accidentally spend more than your credit limit, you must pay a fee to the credit card company. Most fees for this are around $29.
9. You must pay a fee every time you spend more than your limit. TRUE FALSE
10. Credit limits are the same for everyone. TRUE FALSE
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Look at the terms from this Advantage Mastercard and answer the questions:
Annual Percentage Rates Introductory rate of 5.9% until June 1st, 2020. After June 1st, 2020, rates become:For purchases: 11.99%For cash advances: 28.99%If you do not follow the Terms: Up to 23.99%
Grace Period 20 days, but none on balance transfers
Annual Fee None
Minimum Finance Charge 50 cents
Transaction Fee for Cash Advances
4% of the amount of each cash advance, but not less than $10
Transaction Fee for Balance Transfers
4% of the amount of each balance transfer, but not less than $10
Transaction Fee for Late Payments
$29
Over-the-Credit-Limit Fee $29
1 What is the interest rate after June 1, 2020 for:
purchases =
balance transfers =
cash advances =
2 Is there a special introductory rate?
3 How much is the annual fee?
4 How long is the grace period?
5 What is the fee for late payments?
%
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Credit card companies make a lot of money from the interest that customers pay them. They want your business! They will send invitations in the mail, call you on the phone, advertise on the internet, and do many other things to find new customers. Before you decide to apply for a credit card, be sure to understand and know the answers to these four important questions.
Reading a Credit Card StatementWhen you use a credit card, you will receive a bill every month. You should read your bill carefully to be sure that the information is correct. It’s a good idea to keep the receipts from your credit card transactions until you see them on your bill. Then you can make sure that the bill has the correct information for each transaction.
Read the credit card bill on the next page and answer each question.
1 What is the smallest amount that Olga can pay this month?
2 How much does Olga owe America One Visa?
3 How much did she pay the credit card company last month?
4 What is the APR during this month?
5 How much does she owe for interest this month?
6 How many purchases did she make during this billing period?
7 When is her next payment due?
l What is the interest rate for purchases, balance transfers, and cash advances?
l Is there a special introductory rate?
l How much is the annual fee?
l How long is the grace period?
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America One Visa
America One Visa
10/18 Office Depot #123 San Diego, CA 17.6310/26 Thompson’s Medical San Diego, CA 90.0011/01 Culture Market San Diego, CA 47.12
11/01/1912/01/19
972.0243.00
12/10/19
3312.99%
11/14/19
972.0243.00
12/10/19
909.9897.17
154.75
12.460.00
972.02
3000.001500.002027.98
Olga Ivanovish
Olga Ivanovish1622 Cordly DriveSan Diego, CA 92108
The totalamount of
money thatOlga owes
The smallestamount of
money thatOlga can pay
for this month
The period fromthe first day
to the lastday of thisstatement
The last day of transactionsthat were included in thisstatement
Everything thatOlga bought
or paid for
The interest rate Olga will pay this month
The amount thatOlga will pay for
interest this month
The amount of credit Olga canborrow before
she reaches her credit limit
The highest total amountthat Olga is allowed to
charge with her card
The total amountof money that Olga
owed last month
The date thatthe credit cardcompany mustreceive Olga’sPayment
The amount Olgapaid last month
The READ Center acknowledges and thanks the following people and organizations for their help in developing the Financial Literacy Series.
Reading and Education for Adult Development (804) 288-9930
www.readcenter.org
The Virginia Adult Learning Resource Centerand the San Diego Center for Education and Technology
for providing content.
Atlantic Union Bank and Trustfor a grant to develop the Financial Literacy Series.
READCenterStudents
who tested the materials and providedtheir ideas and insights.