Copyright Goodheart-Willcox Co., Inc. 222 Unit 3 Investigating Career Pathways in Human Services With revolving credit, lenders make money through fi nance charges, which are fees charged for buying on credit. In the case of credit cards, lenders may charge both the merchant a percentage of the purchase price and the purchaser for balances owed on the account. Although there are regulations governing the amount of fi nance charge that may be charged, there is a wide range of interest rates. These rates may range from 0 to 24+ percent Annual Percentage Rate (APR). The rate charged can depend on the credit-worthiness of the borrower, the type of loan, the amount and length of the loan, promotions, and any collateral property that may protect the loan. Credit spending, for example, using credit cards rather than cash to make purchases, has become out of control in the last few decades. As a result, many people face huge debts. Credit card companies generally require borrowers to make a minimum monthly payment. Unfortunately, if only the minimum monthly payment is made, the majority of the payment goes toward interest. The debt remains for many years, until the loan is paid. This can turn into a vicious cycle of credit overuse and high interest costs. The best way to utilize credit card spending is to spend only as much as a person can budget to pay off each month. This allows for the use of a bank’s money with no interest expense. Expert Insight “Never spend your money before you have it.” Thomas Jefferson, former US president fizkes/Shutterstock.com Figure 8.19 Defaulting on a federal student loan can result in the government taking a portion of your earnings, suing you, or reducing payments on benefits (such as Social Security retirement or disability). The IRS can also take any tax refunds you receive. If someone is struggling to pay a student loan, what should the person do?