Warm-up

• What are three things you learned from watching “Maxed Out”?

Take out “Randy’s Story”

Credit:The Good…The Bad…The Ugly

http://www.hulu.com/watch/1389/saturday-night-live-dont-buy-stuff

Target

• I can explain the different types of credit available

• I can identify the 3 Cs of credit

Scary Stats

• 56% of college students report obtaining their first credit card at age 18.

• 83% of college students have at least one card, with the average carrying four cards

Scary Stats

• 60% of students maxed out their cards their freshman year.

• 71% of young adults do not pay off their balance in full each month.

• 11% of college students make less than the minimum payment each month

Scary Stats• Credit card balances among college

students increased 134% in the last decade

• The average balance on a students card is $2,169.

• Upon graduation, a students average credit card debt is nearly $4,000.

What is the cause of this!!!???

Not a good time to be young.

• Sky rocking college tuition costs• Less college funding, higher loan rates• Flat real wage growth (25-34 year olds)• Increase in under-and un-employment• Rising living expenses

Abusive Practices Aimed at Young Adults

• High fees• Heavy interest rates• Complex terms

Lastly…

• 22% of young adults have taken a job that they would have otherwise wouldn't have because they needed more money.

• 58% moved back home after college.

Debt Hurts…Especially the young!

What is Credit?

• “Buy now, pay later”• Supplying of money,

goods, or services at present time in exchange for the promise of future payment

Types of Credit

Secured Loan• Fixed payments • Backed by collateral

–Assets that can be repossessed• Ex: mortgage

Types of Credit

Installment Loan• Equal monthly payments• Fixed interest rate• Possible repossession if not paid

back• Ex: Car Loan

Acceleration Clause

If one of more payments are missed, the remaining balance is due immediately.

READ THE FINE PRINT!

Types of Credit

Open-end Credit• Interest rates can change• Interest charged on balance• Can charge up to certain limit• Ex: Credit Card

Advantages:• Convenient for emergencies • Don’t have to carry cash• May receive bonuses• More convenient than writing checks• Consolidates bills into one payment

Disadvantages:

• Interest (higher cost of items)• May require additional fees• May lead to over spending and debt• Credit score can be damaged

Use Credit Wisely

You should use credit to buy:– House – Car– Education (student loan)

and you’ll avoid trouble

The Three Cs of Credit:Are you credit worthy???

Character: The way you handle money and have repaid debt in the past.

– Credit Score

Capacity: Your ability to pay the debt after considering other monthly expenses.

– Income vs. Expenses

Capital: The value of your assets – Assets may be repossessed if you cant pay back

loan.

Consequences of Irresponsible Credit Card Use

Denial of credit High interest rates Difficulty in renting an apartment Denied employment Shattered dreams Higher insurance rates Loss of friends

Credit Tips

• Pay your credit card balance in full every month

• Pay your credit card bills on time • Apply for only credit cards that are needed • Keep track of all your credit card charges by

keeping receipts • Check your monthly credit card statement

for errors

Avoid

• Making late credit card payments • Paying only the minimum payment • Exceeding your card’s credit limit • Charging items that you can’t pay off

immediately • Owning too many credit cards

Shopping for the best card

• Low APR (Annual Percentage Rate)– Look out for teaser rates

• Annual fees• Fixed vs. Variable• Fees• Special features• Avoid store credit cards!!!!!!https://www.youtube.com/watch?v=JcPWjjAbTe0