Totals Year-to-Date
COPYRIGHTED MATERIAL
Total fees charged in 2016 Total interest charged in 2016
$90.14 $18.74
10
Interest Charge Calculation
10 Interest Charge
Your Annual Percentage Rate (APR) is princi pal interest rate on your account.
Calculation. Different charges have different APRs. This section explains which APR applies to the charge.
Balance Subject to Interest Rate
Purchases Cash Advances Balance Transfers Type of Balance
14.99% (v) 21.99% (v) 0.00% Annual Percentage Rate (APR)
$6.57 $4.79 $0.00 Interest Charge
$533.32 $265.00 $575.67
(v) = Varable Rate
Source: www.mycreditunion.gov/Pages/pocket-cents-understanding-credit-card-statement.aspx
Past Due. If you miss a payment due date, you are charged a late fee . Depending on your card terms, you may also have triggered the penalty rate for future charges . If you fail to bring the account current by the next billing cycle closing date (which is just a week or so later), your account is past due . If this pattern continues through another billing cycle, the account will be 30 days past due. For example, let’s say your billing cycle closing date is June 30 and your payment due date is July 22. You miss the payment due date. Bingo: A late fee is charged and the rate may go up for future charges. If you do not bring the account current by the next billing cycle closing date of July 30, your account is 30 days past due. Many card companies don’t report past due status to a credit bureau until you are 60 days past due, but a continual pattern of past due status on your account will harm your credit score. The point is, you can avoid late fees, past due status, and damage to your credit, just by making the minimum payment ! So even when funds are tight, never make less than the minimum payment . Reflect on Learning: Can you explain how credit card fees and interest charges can cause a credit card balance to get out of control very quickly? Answer: Carrying over a balance on the card from month-to-month, making only minimum payments, making only minimum payments AND continuing to use the card to make purchases, and missing the payment due date causes a fee and possible rate increase. Compound interest is working against you! These fees and charges happen automatically. What very important document tells you everything about the status of your credit card? Answer: The credit card billing statement. VI. Using Credit Cards Responsibly There’s no doubt about it, credit card debt in the U.S. is substantial . According to the Federal Reserve Bank, Americans had about $953 billion of outstanding credit card debt as of May 2016. This means the average household has about $15,355 of credit card debt. This is particularly problematic because credit cards have an average interest rate of 15%. Therefore, if you are a member of a household with an average level of credit card debt and making only minimum monthly payments, it will take you about 480 months to pay off your credit card. In that time, you will pay over $20,000 in interest. That’s a lot of wealth devoured by that hungry beast! In 2015, over 8% of Americans were 90 days or more past-due on their credit card payments. This means that millions of people are losing a great deal of wealth, dealing with collection agencies, and suffering serious damage to their credit score. PRODUCT PREVIEW
THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY 249
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