Credit card debt and mortgages. The class was really engaged.

Few knew how the credit card companies made money (other than the interest charged on loans to consumers). We talked about what the merchants pay, why they may not accept cards for small purchases, why they may not accept American Express. How offering cash or check might save you some money. How the financial reform package passed by the last Congress made some of the more egregious practices illegal. We talked too about the advantages of a credit card economy – for the consumer and for  the merchant .

Someone asked about Paypal , so we talked about that too – essentially, it’s an on line debit card, with other bells and whistles (e.g. money transfer) sometimes available.

Mortgages were interesting too. What’s foreclosure? Equity? Escrow? What happened in the recent housing crisis?

I read this in the Globe last week:

Over the past year, the average interest rate for so-called jumbo loans — $523,750 and up in the Boston area — has fallen from 6 percent to about 5 percent for a 30-year, fixed-rate mortgage. That translates into a monthly savings of about $375 on a $600,000 loan. (www.boston.com/yourtown/boston/backbay/articles/2010/11/20/rates_for_big_loans_tumble/)

We used an updated version of the PayoffDebt spreadsheet from the book to check that the $375/month savings was correctly computed.

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