Credit and Debt

1
Staying on Good Terms Managing Creditand Debt
2
(No Transcript)
3
The Upside of Credit Use

• Buy/consume now, pay later
• Establish favorable credit history
• Protect against fraud
• Cope with emergencies

4
The Downside of Credit Use

• The price of credit is high KNOW the APR!
• Additional fees add to the cost
• Credit makes it easy to overspend
• You are vulnerable to fraud

5
College Students and Credit What We Know

• 84 have at least one credit card
• Half have 4 or more credit cards
• Average outstanding balance of 3,173
• 89 incurred finance charges by carrying a
  balance
• 55 of Georgia college students had debt, an
  average of 17,296 74 of graduating seniors had
  debt
• Parents are borrowing too

Sources Project on Student Debt, Sallie Mae
6
All Cards Are NOT Created Equal

• Credit
• Credit Cards
• Charge Card
• Debit
• ATM Card
• Check Card

7

• Other Types of Plastic Cards
• Stored Value Card
• Smart Cards

8
Credit Card Accountability, Responsibility, and
Disclosure (The CARD) Act of 2009

• Restrictions on interest rate increases on
  existing debt
• Restrictions on late fees
• Eliminates universal default
• Statements must go out 21 calendar days in
  advance of the due date
• 45 day notice on rate hikes

http//financialtip.blogspot.com/2009/05/credit-ca
rd-reform.html
9
Credit Card Accountability, Responsibility, and
Disclosure (The CARD) Act of 2009

• Eliminates fees for processing payments
• Eliminates over-the-limit fees
• Unless consumer asks for account to allow
  over-the-limit transactions
• Rates cant be raised for the first year after
  account is opened
• Unless creditor uses a promotional rate
• Reasonable payment allocation
• Apply payments to highest rates
• Mandatory 5 year life for gift cards

10
Credit Card Reform, Continued

• Among other provisions, those younger than 21
  wont be able to get a credit card unless
• A parent or guardian co-signs OR
• The young adult can prove s/he has independent
  means to make payments
• Permission from co-signer required to increase
  credit limits

11
Credit Card Reform, Continued

• Prohibits card issuers from offering freebies
  like food or trinkets when marketing on campus
• Stops prescreened credit card offers for
  consumers under 21

12
Credit Myths

• Once paid, bad debt will go away
• Im not responsible for debts on joint accounts
  or co-signed accounts if they arent my
  purchases
• Credit is what got me into this mess
• Credit card companies wouldnt send me offers if
  I couldnt afford it
• If I dont use credit, I wont be able to buy
  anything

13
Ten Credit Mistakes

1. Overspending
2. Holding too many credit cards
3. Making only minimum payments
4. Carrying a permanent balance
5. Assuming low interest rates stay the same

Continue...
14
Ten Credit Mistakes

1. Paying a higher interest rate than necessary
2. Paying extra for incentive credit cards
3. Not reading the disclosure statement
4. Paying off the wrong credit cards first
5. Ignoring extra fees or penalties

15
Beware of Higher Cost Credit

• Tax Refund Loans
• Rent-to-Own
• Car Title Loans
• Bounced Check Protection

16
Signs of Credit Trouble

• Maxing out credit cards
• Using one card to pay the balance on another
• Not knowing your total debt
• Borrowing from family members to pay debt
• Getting frequent cash advances

17
Staying Out of Credit Card Trouble

• Shop for the credit card with the best terms.
  Consider - Annual Fee - APR - Rewards
  Program
• Dont charge perishable items
• Pay off as much as possible every month

18
Pay As Much As You Can!Balance 3,000 Interest
Rate 18
of Balance Paid Each Month Interest Time to Pay Off
2.0 7,930 37 years, 7 months
4.0 1,716 10 years, 10 months
5.0 1,240 8 years, 4 months
19
Timing Makes a Difference

• Dont buy on impulse
• Notify your creditors if you cant make your
  payments on time
• Report lost/stolen cards immediately

20
Other Credit Card Management Suggestions

• Store your credit cards in a safe place
• Report lost/stolen cards immediately
• Fair Credit Billing Act limits liability on your
  credit card to 50.
• Track your charges
• Document your concerns in writing
• Talk to your creditor
• ask them to lower your credit limit
• ask them to change when your bill is due

21
Credit and Debt Counseling Services

• Budget Counseling
• Debt Repayment Plan
• You agree to not use the cards
• The debt counselor may arrange for you to make
  smaller payments and pay less interest and fees.
• You pay the debt counselor who pays your
  creditors
• The debt counselor will not put the repayment
  plan on your credit report BUT creditors may

22
For individual help with serious debt problems,
contact CredAbility www.CredAbility.org 800-251-C
CCS
23
For more information, contact The Peer
Financial Counseling Program (insert web address,
phone number, and/or e-mail)
23
24
Special Thanks to...