Credit Abuse Resistance Education (CARE) Program.

Credit Abuse Resistance Education (CARE) Program

Credit Abuse Resistance Education Seminar 2

What do you spend money on?


Are the items you buy things you need or things you want?


How do you pay for what you want?


The average college undergraduate owes credit card debt of:

(a) $500(b) $1,500(c) $3,000(d) $5,000

Multiple Choice


Answer: C

The average college studentowes about

$3,000 in credit card debt.


Payments of $10 per month 2/8/2008 through 10/8/2015.

93 monthly payments required

# Date Payment Interest Principal Balance1 2/8/2008 10.00 7.50 2.50 497.502 3/8/2008 10.00 7.46 2.54 494.963 4/8/2008 10.00 7.42 2.58 492.384 5/8/2008 10.00 7.39 2.61 489.775 6/8/2008 10.00 7.35 2.65 487.126 7/8/2008 10.00 7.31 2.69 484.437 8/8/2008 10.00 7.27 2.73 481.708 9/8/2008 10.00 7.23 2.77 478.939 10/8/2008 10.00 7.18 2.82 476.1110 11/8/2008 10.00 7.14 2.86 473.2511 2/8/2008 10.00 7.10 2.90 470.352008 Totals 110.00 80.35 29.65 2009 Totals 120.00 81.59 38.412010 Totals 120.00 74.07 45.932011 Totals 120.00 65.10 54.902012 Totals 120.00 54.37 65.632013 Totals 120.00 41.52 78.482014 Totals 120.00 26.16 93.8484 1/8/2015 10.00 1.40 8.60 84.5685 2/8/2015 10.00 1.27 8.73 75.8386 3/8/2015 10.00 1.14 8.86 66.9787 4/8/2015 10.00 1.00 9.00 57.9788 5/8/2015 10.00 0.87 9.13 48.8489 6/8/2015 10.00 0.73 9.27 39.5790 7/8/2015 10.00 0.59 9.41 30.1691 8/8/2015 10.00 0.45 9.55 20.6192 9/8/2015 10.00 0.31 9.69 10.9293 10/8/2015 10.00 0.92 10.92 0.002015 Totals 100.00 6.84 93.16

Grand Totals 930.00 430.00 500.00

Payments of $50 per month 2/8/2008 through 11/8/2008.

10 monthly payments required

# Date Payment Interest Principal Balance1 2/8/2008 50.00 7.50 42.50 457.502 3/8/2008 50.00 6.86 43.14 414.363 4/8/2008 50.00 6.22 43.78 370.584 5/8/2008 50.00 5.56 44.44 326.145 6/8/2008 50.00 4.89 45.11 281.036 7/8/2008 50.00 4.22 45.78 235.257 8/8/2008 50.00 3.53 46.47 188.788 9/8/2008 50.00 2.83 47.17 141.619 10/08/2008 50.00 2.12 47.88 93.7310 11/08/2008 95.13 1.40 93.73 0.002008 Totals 545.13 45.13 500.00

Grand Totals 545.13 45.13 500.00

$500 purchase on 1/8/2008

Annual Interest Rate 18%

Minimum Payments Matter!


You must be 18 or older to get credit in your name.

True or False?


Before you become 18, you may obtain a credit card in which an adult is the authorized user.

Once you’re 18, you can legally incur debt in your own name.

True


True or False?

All credit card companies charge the same annual percentage rate (APR) of interest on the balance you owe.


Different banks charge different rates.

Also, other important terms vary(e.g., annual fees, late fees, grace periods)

False


If you pay your credit card balance on time and in full each month, it doesn’t matter what rate the bank charges on your credit card.

True or False?


True

Because you pay interest on the unpaid amount each month, you never pay any interest charge if you pay the entire amount due each month.

Banks hate it when you do this!


You pay no interest on a debit card purchase.

True or False?


True

Your ATM card probably serves as

a debit card.

A debit card works like a check. Money is instantly deducted from your checking account.


Everyone over age 18 has a credit report.

True or False?


Credit reports exist only for people who have established a credit history.

Having no credit history can have adverse consequences.

False


If you are late or miss a few credit card payments, the interest rate you pay may increase sharply and your credit report will be adversely affected.

True or False?


For example on one user’s credit card, the rate jumped from 4.9% to 24% when one payment was late! (Late charges also can accrue.)

A missed payment may appear on your credit report, and could remain there for 7 years.

True


Bouncing just one check won’t cause you to have credit problems.

True or False?


False

If you bounce a check, your bank may put your name in Chex SystemsSM.

You could be “blacklisted” for up to five years. This might mean you may not be able to use a checking account.


True or False?

If you apply for an auto loan, the lender will probably review your credit report.


True

Lenders almost always will reviewyour credit report.

TransUnion

Equifax Experian

Credit-reportingagencies

Visit AnnualCreditReport.com for a free copy of your credit report.


FICO Credit Scores

A score determined by your past use of credit, as recorded by the three credit-reporting agencies

A 3-digit number between 300 & 850

Created by Fair Isaac Corporation

You have three FICO scores, one from each reporting agency


FICO Credit Scores (continued)

The cost difference between the highest and lowest credit scores for the $200,000 loan:

Average interest rate for a $200,000 30-year, fixed-rate mortgage on August 5, 2005, based on credit scores nationwide

$478 per month $5,736 per year $172,221 for the

entire 30-year loan

5.79

5.92

6.46

7.61

8.53

9.29

0.00 2.00 4.00 6.00 8.00 10.00

720 - 850

700 - 719

675 - 699

620 - 674

560 - 619

500 - 559

FIC

O S

core

Interest Rate (%)


Tips: Establishing Credit

Establish good credit by Taking out a small loan and repay it in a

timely manner to establish a good credit record

Getting a single credit card with a low credit limit

Getting a prepaid or secured credit card


Tips: Obtaining a Card

“Shop” for a credit card with the best terms that suit you Read and understand

the terms in the disclosure

Pay close attention to various late fees and penalties

Evaluate whether a rewards card is worth extra fees and costs

ANNUAL MEMBERSHIP FEE: Refer to your statement in the month in which the fee is billed.

RENEWING YOUR ACCOUNT: You may have your annual membership fee credited to your account if you close your account within 30 days from the mailing or delivery date of the statement containing the fee, even if you use your card during that period. You may call the Customer Service number or write to the Customer Service address on your statement during this 30 day period and your account will be terminated; we will credit your account for the amount of the annual fee.

ANNUAL PERCENTAGE RATE: Refer to the Rate Summary section of this statement. Your periodic rates and APRs may vary.

RATE AND ACCOUNT SUMMARIES: The purchase and advance features of this account may be listed in the Rate Summary Section of this statement under the following titles: Standard Purch, Purch/Adv, Standard Adv, and various numbered Offers. The Account Summary section of this statement includes on the PURCHASES line subtotals for all purchase features, and on the ADVANCES line subtotals for all advance features, of the Previous Balance, new Purchases & Advances, Payments & Credits, FINANCE CHARGE and New Balance amounts.

PERIODIC RATES: (D) and (F) indicate a dailyperiodic rate. (M) indicates a monthly periodic rate.


Credit card solicitations on the Notre Dame University campus


Tips: Using Your Credit Card Wisely

Before you make a purchase using credit, determine:

How much the purchase will really cost you

Whether you can actually afford the purchase

If it is better to wait and pay in cash



Limit credit card use for essential purchases only (i.e., needs, not wants)

Try to pay the entire amount due each month by the due date

Don’t max out on your credit limit Watch card balances to avoid overlimit

fees Keep your card balance below 30% of

your limit



Keep track of where your cards are

If you hand a credit card to a merchant, try to keep it in view

Close accounts you don’t use.

Try to avoid cash advances


Monitor the interest rate section on your monthly statement

Tips: Maintaining Your Card


A Warning Sign of Credit Abuse

You pay credit card bills with other credit cards!

This is known as credit kiting.


Tips: Getting Out of Credit Card Debt

Stop charging purchases Pay cash, write a check, or use a debit

card Avoid store charge cards

Calculate how long it will take to pay off credit cards. Visit Bankrate.com

Make a plan to pay debt and stick to it


Tips: Getting Out of Credit Card Debt

Pay more than just the minimum payment amount

Ignore offers to skip payments Interest continues to accrue on unpaid

balance Pay higher-interest cards first, but don’t

miss any payments on any card


New vs. Used Cars

Price today:$175,000Price tomorrow: $140,000

2004 Honda Civic 2dr$12,757


Do your homework

Consider total transportation cost before buying

Comparison shop online for your purchase and your sale


Financing Your Car

• Comparison shop for the best interest rate and terms

• Agree on a price BEFORE you talk about financing or trade-ins!

• If you can’t pay for it in 3-4 years, you can’t afford the car


Student Loans

Student loans are not a sacred cow.

Everyone has a budget, even when it comes to educational spending.

Shop as carefully for your student loans as you do for your college.

Student loans = 10 year mortgages


Student Loans Work study programs help defray the

need for loans and give you a jump start for your résumé

Explore need-based scholarships before you borrow (www.fafsa.ed.gov)

Use your loans for tuition, but earn your spending money

Pay off your student loans as quickly as possible; look at consolidation possibilities at www.loanconsolidation.ed.gov


Common Financial Mistakes Rationalizing credit card spending as

“outside” the budget Trying to maintain parents’ lifestyle on a

college budget Paying fees for small cash advances and for

withdrawals at non-member ATMs Using cell phones over the monthly allowed

minutes Using a payday loan or check-cashing

establishment


Common Financial Mistakes (continued)

Paying fees for not using your credit card

Paying almost the full balance on your credit card, but not quite all of it

Obtaining multiple credit cards without any need or use for them


Words of Wisdom

“Wealth is not the same as income. If you make a good income and spend it all, you are not getting wealthier. You are just living high. Wealth is what you accumulate, not what you spend.”

Credit Abuse Resistance Education (CARE) Program.

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Transcript of Credit Abuse Resistance Education (CARE) Program.