CARE
Credit Abuse Resistance Education Program
provided by the United States Bankruptcy Court for the District of Colorado
Teens surveyed reported spending 98% of their money, rather than saving it
Why CARE?
68% of teens report never discussing responsible credit card use with any family member
Graduating college students average $20,402 of debt with $3,262 on credit cards
84% percent of undergraduates indicated they needed more education on financial management topics. In fact, 64% would have liked to receive information in high school and 40% as college freshmen.
Credit is the ability to borrow money
Borrowing money creates debt
Debt is what you owe It costs to borrow money
What is credit?
1. Long Term Credit - payments made over several months or years
Mortgages Car Loans Student Loans
2. Short Term Credit – single payments Utility Bills Cable/Satellite Cellular phone bills
Types of Credit
Use a checking account or debit card
Pay all bills on time paying for your own cell phone might be a great place to start!
Take out a small loan from a bank and repay it timely
How would I start using credit?
A debit card works just like a check The money for the purchase comes
directly from your bank account You must have money in the bank account
to use the card can’t spend what you don’t have
Many places prefer debit cards over checks or do not accept checks at all
Debit cards are different from Credit cards
Interest is the amount that a lender charges to borrow money
The higher the interest rate, the more money you pay
Interest rates vary from credit card company to credit card company
What is Interest?
Credit Card Costs and Fees
Finance Charges Over-the-Limit FeesBalance Transfer Fees
Document and Research Fees
Cash Advance Fees Reissued Card Fees
Universal Default Rate Annual Fees
Returned Check FeesGo to www.cardratings.com to find deals
A credit report is a history of how well you have paid your bills
Also collects other financial information about you
Filing for bankruptcy will remain on your credit report for 10 years
What is a Credit Report?
Factors That Negatively Affect
Your Credit
1. History of late/past due payments
2. Failure to make payments
3. Having too much credit
4. Having no credit
5. Not leaving a forwarding address
6. Judgments against you/Bankruptcy
Emergencies
Large Purchases
Internet Purchases
Establish a Credit History
Identification
Safety
Some Good Reasons to have Credit Cards
It is very easy to lose track of your purchases
You end up spending more than you think
The convenience of a credit card can be overpowering
leads to unnecessary and even foolish purchases.
Some Downsides to Credit cards
Credit Card Control
Reasons to reduce or eliminate the credit card habit:
1. Improve your credit rating
2. Save more money and pay less interest
3. Regain control over your life when you control your spending
Learning to live within your means will help you get ahead (wants vs. needs)
Budgeting creates financial security
Budgeting will keep you out of debt
Saving for the Future
Keep track of what you make. Keep track of what you spend. Ask yourself, how close are they?
SO, how do you budget??
To make your budget work,
you must equalize what you spend with what you make by:
1) Making more2) Spending less
(Sounds easy, huh?)
Start making adjustments…
Earn more by working more hours
Reduce expenses by buying your coffee at 7/11 instead of Starbucks
Be honest with yourself: Do I really need this or do I simply want this?
Then, stick to your budget!
Sticking with a budget is a lifelong process
Be flexible your budget will change as your
life changes
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Let’s give you an example
What if you bought…
Laptop = $1,300.00
Scanner/printer/fax for $400
Software/wireless router for $300
TOTAL: $2,000
you used your credit card
you make monthly payments of $300
you never miss a payment
annual percentage rate on your card is 8%
{
What will the system end up costing you?
(remember, it costs to borrow money)
How long will it take to pay for it?
Your total cost will be $2052
It will take you SEVEN MONTHS to pay for it
Now, instead of an 8% rate, assume that, because your credit rating is poor, you must pay interest at a rate of 24%.
Also assume that you pay the MINIMUM MONTHLY PAYMENT of only $50 per month.
It will take you 82 MONTHS (almost SEVEN YEARS) to pay for it
Total payment: $4,085!
Many banks and credit cards are actively seeking younger customers
Understanding how credit works and what kinds of things to avoid when using credit cards is essential before the damage is done
There is a growing crisis in this country with credit card abuse
True or FalseYou pay no interest on a debit
card purchase.
TRUE!A debit cardworks just
likea check.
True or False There is a credit report for
everyone over age 18.
FALSEThere is a credit
report only for people who have
established a credit history.
Having no credit history can have
adverse consequences.
True or FalseIf you are late in making a few payments on your credit card, the interest
rate you pay may increase sharply.
TRUEFor example, on
one Platinum VISA card, the interest rate
jumps from 4.9% to 30% if you pay late or miss even
one payment. Late charges also
accrue.
True or FalseIf you miss just one or two
payments on your credit card, it won’t hurt your
credit rating.
FALSE
That negative information can legally remain on
your report for up to 7
years.
Last one…promise!
True or FalseNo one really looks at credit
reports.
FALSE People who lend you money will almost always review your credit report. Car, home, credit cards.More prospective employers also look at credit reports.You can receive free copies of your credit report each year—worth reviewing!
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