Chapter 8 Consumer Services 223 Copyright Goodheart-Willcox Co., Inc. Pathway to Success Pathway to Success Using Credit Wisely As soon as you turn 18 years old, many credit companies begin to send credit card offers in the mail. As you begin your journey into independence, getting your fi rst credit card can be an exciting time. Learning to use that credit card wisely is an entirely different lesson. Points to remember about credit cards include the following: 1. Credit cards are actually high-interest loans in disguise. The company loans you money and then gets their money back by charging interest. If you pay off your bill each month, you will not pay interest. If you carry a balance, however, the fi nance charges can be as much as 25 percent APR. 2. Companies record your payment history in your credit report. After college, you need a good credit history to rent an apartment, buy a car, or take out a loan. Many employers also check credit history before they hire. 3. If a credit card is in your name, you are responsible for paying the bill. 4. Read all application materials carefully, especially the fi ne print. Find out what happens after the introductory interest is over. What happens to your interest rate if you fail to make a payment? 5. Use a debit card or cash instead of credit, if possible. Save the credit card for emergencies. 6. Avoid buying items you do not need. 7. Pay bills on time to keep charges minimal. Pay the full balance every month if you can. 8. The Credit Card Accountability and Disclosure Act of 2009 limits how credit card companies can do business with people younger than 21 years of age. It requires underage applicants to have an adult cosigner—with ability to repay the debt—to obtain a credit card. Research Credit Cards Gather credit card offers from the mail or online. Compare the credit applications from at least two different companies. Make sure to compare the following: • Is there an introductory interest rate? If so, what is it? • What is the annual percentage rate (APR)? Credit cards often charge different rates for purchases, cash advances, and balance transfers. What are the rates for each different use? • Is the APR fi xed or variable? Fixed rates remain constant while variable rates change depending on the prime rate. • What is the billing cycle for the card? • How long is the grace period? • Is there an annual fee? If so, how much is it? • What fees are associated with cash advances, balance transfers, and late payments? • Does the credit card offer any rewards for use? • Does the interest rate change after the introductory period? Based on your research, which credit card offers the best deal? Why? Share your thoughts with the class.