Transcript Credit

Presented by:
THE
BASICS
WHAT IS THE DIFFERENCE?

CASH?
A DEBIT CARD?
 A CREDIT CARD?
 A GIFT CARD?

What is DEBT?
A. You are in a deep hole.
B. You have to pay money to someone.
C. You owe someone a favor.
D. You are entitled to free stuff.
Answer: B
When you are in debt, you
have to pay money to
someone.
What does CREDIT mean?
A. You have a good reputation.
B. You might graduate.
C. You can borrow to buy things.
D. You can get things at the store for
free.
Answer: C

Credit is the ability to borrow money.

Borrowing is the creation of debt.

Debt is what you owe
There is no such thing as a free
lunch.
What is INTEREST?
A. Money you pay to rent money.
B. Someone else likes you.
C. You like someone else.
D. You qualify for a scholarship.
Answer: A
Interest is the amount a lender
charges you to borrow money
from them.
The Trick about Interest


The higher the interest rate, the more
you will pay.
What is compound interest?
A. Liking more than 1 girlfriend or boyfriend.
B. Interest charged on interest that is
added on to the credit card bill.
C. Something you learn in chemistry class.
D. A grinding power.
Answer: B
A debt that goes unpaid and is
subject to compound interest
grows into a much larger
number very quickly.
The True Cost of Credit
The True Cost of Credit
A $7,000 Balance (at 20% interest)
= $1, 400/year
= $116/month
(…and you haven’t paid any of the $7,000
back yet)
MAKING MINIMUM PAYMENTS
If you make the minimum payment of 2%:
Your interest charges will total:
$30,294.80
Number of payments you make: 601
Total number of years to payment:
50.08
In 50.08 years you will paying your final
payment on that $7,000 balance with
your social security check!
If You SAVE That Money…
If you save or invest $20 per month for 50.08 years you will have:
5% = $54, 082.00
6% = $76,923.97
8% = $161,861.61
This is compound interest working for YOU!
Thank goodness for Make-overs
The Credit CARD Act of 2010 requires that
account statements disclose additional
information such as your payment due
date and consequences of only making the
minimum payments.
Source: Creditcards.com
No More Tricks!
45 days advance notice to increase
interest rate
 Cancellation of card is not a default
 Interest rate cannot be increased for past
charges or because you default on another
card
 Fees and interest rates cannot increase for
1 year except when there was a
promotional rate for 6 months

No more fooling you!
No over limit charges unless you agree
 Card agreements (the fine print) must be
available on the internet
 No credit cards if you are under 21 unless you
have an over 21 co-signer or you can show you
can pay the card
 No more freebies to open up cards on college
campuses

WATCH OUT! This does not apply to sporting
events or other venues.
New & Improved Statement will
show:

Payment information
New balance $1,734.53
Minimum payment due $53.00
Payment due date 4/20/12
–Late payment warning: If we do not
receive your minimum payment by the
date listed above, you may have to pay
a late fee of up to XX and your APRs
may be increased up to the Penalty APR
of 28.99%
Source: Creditcards.com
Disclosing the Minimum Payment Pitfall!
Minimum payment warning: If you make
only the minimum payment each period, you
will pay more in interest and it will take you
longer to pay off your balance.

For example, if you had a balance of $1,000 at an
interest rate of 17% and always paid only the minimum
required, it would take over 7 years to repay this
balance.

If you would like information about credit counseling
services, call 1-800-XXX-XXXX
What the new statement will show on APR’s

These account changes will impact your account as follows:
Transactions made on or after 4/9/12: As of 5/10/12, changes to
APRs described below will apply to these transactions.
Transactions made before 4/9/12: Current APRs will continue to
apply to these transactions.
Revised terms, as of 5/10/12
APR for purchases 16.99%
Late payment fee:
$32 if your balance is less than or equal to $1,000;
$39 if your balance is more than $1,000
Source: Creditcards.com
Consequences of
Good & Bad Credit
WHAT IS CREDIT AND CREDIT
SCORE?

It’s a matter of life and debt!

Just like you are graded in school on how you
perform academically…YOU ARE GRADED in LIFE
on HOW you perform FINANCIALLY

A 3-digit number between 300-850. The better
your credit, the higher your credit score.
Factors used to determine your
credit score

how you pay back your debts
–
–
–
–

paid
paid
paid
paid
on time?
at all?
debt with credit cards?
in part or in full?
how you manage your debts
– do you have high balances?
– do you have too many open credit cards?
WHO GRADES YOUR CREDIT
REPORT?
Credit Bureaus!
Creditreporting
agencies
Equifax
Experian
TransUnion
Visit
AnnualCreditReport.com for a free copy of your credit
report and myfico.com for your credit score.
What is so important about Good
Credit?

Obtain loans for cars, home, education

Better interest rates

Lower installment payments

May help you rent and obtain employment
What are consequences of
Bad Credit?
Being turned down for a loan
 Being turned down from a job
 Creditors calling your home or work
 Being sued and having judgments against
you including wages garnished
 Bankruptcy
 Relationship problems, depression,
suicide

Did you know?
If you apply for an
auto loan, the
lender will
probably review
your credit
report.
And did you know?

FALSE
And did you also know?
-
Missing just 1 or 2 credit card payments
will hurt your credit rating.
-
Negative information can legally remain
on your credit report for up to 7 years.
What is bankruptcy?
- What you own may get sold to pay
off your debts
- Some of your income may be used
to pay your old debt
- If you’re an honest debtor, the
Court may discharge your debt and you
will have a fresh start
Tips for Good Credit
•
Pay bills in full and on time
•
Don’t open too many cards but if already
opened, do not close these established
accounts
•
Do not have a balance on your credit
card exceeding more than 20-30% of
your credit limit (DON’T MAX OUT!)
TIPS: Get Credit with knowledge

Beware of Credit Card
Representatives at
Games, Concerts, Events.

Resist opening a new
credit card account for
the enticing “free
gifts”
Tips: Obtaining a Card

“Shop” for a credit
card with the best
terms that suit you

– Read and understand
the terms in the
disclosure (review
online)
– Pay close attention to
various late fees and
penalties



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 daily
periodic rate. (M) indicates a monthly periodic
rate.
Tip: Shop for a Credit Card
COMPARE CREDIT
CARD OFFERS:


BANKRATE.COM
– click on the tab
“credit cards”
TIPS: Make a Budget
INCOME
Gross wages
Expenses & Savings
$1,600
Less payroll deductions $400
Net Monthly Pay
$1,200
Rent
Utilities
Food
Clothing
Laundry
Recreation
Transportation
Savings (LESS)
Total Expenses:
$500
$30
$200
$100
$20
$50
$100
$200
$1,200
Tip: Use your card wisely!

Limit credit card use for essential
purchases only. You may want that shirt,
but do you really need it?
How to write a check: Step 1
Step 2
Step 3
Step 4
THE END