CARE Credit Abuse Resistance Education Program provided by the United States Bankruptcy Court for...

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%

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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!