CONQUERING CREDIT

Presented by: Richard DeShields

. Students will understand how credit decisions affect future decisions. Students will identify how credit cards work and understand the impact of interest.LEARNING OUTCOMES Students will identify key terms associated with credit.

Carte Blanche.TYPES OF CARDS A credit card is a system of payment named after the small plastic card issued to users of the system where the issuer lends money to the consumer/user to be paid later to the merchant. and American Express) . There are different types of cards: Credit Card Secured Credit Cards Prepaid Credit Cards Charge Card DID YOU KNOW? The credit card was first referred to in the 1880s…but not a reality until the 1920s…the first type of card used to pay multiple merchants came about in the 1950s (Diners Club.

TELL ME WHAT YOU KNOW ABOUT CREDIT CARDS! .

Banks actually receive their money at a lower rates. making money.CREDIT TERMS • Card Issuing Bank—The financial institution that bills the consumer for repayment and accepts risk for fraudulent activity. they increase their rates to you… . calculated monthly or annually. • Interest Expenses—The profit the banks make by charging interest. the less they make…therefore. As interest rates climb. therefore. • Interest is a fee charged by the creditor.

CREDIT TERMS • CREDIT REPORT—A history of how you’ve paid your bills. how much open credit you have. and anything else that affects credit worthiness • CREDIT SCORE—A Three digit score that tells a lender a prediction with some accuracy how likely a borrower is to repay a loan and make payments on time (range from 300-850) .

15 percent is based on the length of time you have had credit. 10 percent is based on new credit (opening new credit accounts will negatively affect your score for a short term—EVERYTIME YOU APPLY FOR CREDIT AND ARE APPROVED OR DENIED…IT IMPACTS YOUR CREDIT) . 30 percent is based on outstanding debt.CREDIT TERMS • CREDIT SCORE (cont)—35 percent is based on payment history.

MONEY WATCH THE FOLLOWING VIDEO AND IDENTIFY SOME OF THE ISSUES INVOLVING CREDIT! .

VIDEO RESULTS WHAT DID WE SEE IN THE VIDEO? Credit Choices now impact future decisions. Decisions regarding credit affect ability to get exactly what you want. Money decisions now could impact future partner/spouse. Identity theft and Credit OTHERS? .

PROBLEMS WITH CREDIT CARDS CREDIT CARD FRAUD DIFFERENT TYPES OF FEES NOT ALWAYS CLEAR CREDIT CARD DEBT IMPACT ON PERSONAL CREDIT .

CREDIT CARD FRAUD STOLEN CREDIT CARD NUMBERS Taken from retailers who have security holes. .) Keep a list of all card numbers and contact numbers (in a secure place) in the event that they are lost or stolen so you can report in a timely manner. Some card companies will refund some or all of the charges that the customer has received for things they did not buy (this becomes expensive to the merchant with eventually affects costs to receive the service. Websites that don’t encrypt numbers Anywhere that card details become humanreadable before being processed. etc.

CREDIT CARD FEES Late Fees Over the Limit Credit Fees Interest Rates Returned Check Fees/Payment Processing Fee Cash Advance Fees Membership Fees (annual/Monthly) And Others… .

many of whom are already in debt with college tuition fees and college loans and who typically are less experienced at managing their own finances. college officials and other higher education affiliates have become increasingly concerned about the rising use of credit cards among college students. . lawmakers. in particular college students. particularly among young people.CREDIT CARD DEBT • Credit card debt has soared. Since the late 1990s. consumer advocacy groups. The major credit card companies have been accused of targeting a younger audience.

Typically has high interest rates (or rates that will increase significantly over time…if you can’t afford it. BAD DEBT • Good debt—debt that is an investment that will grow in value or generate long term incoming (student loans are good debts with low interest rates) Another example: a mortgage. and other low interest debt. automobile. • Bad debt—debt incurred to purchase things that quickly lose their value and don’t generate longterm income. you don’t need it! Payday loans. cash advance loans are some of the worse.GOOD DEBT VS. .

) .GETTING RID OF DEBT • Always be aware of all fees • Cash advances can be trouble • Look for cards with lower interest rates • Making the minimum payment doesn’t help offset interest fees (you will save money on interest in the long run if you pay more than the minimum…but if that’s all you have. pay it and on time.

KEEP YOUR CARD BALANCES TO AT LEAST 25% OR LOWER OF THE CREDIT LIMIT. HARD INQUIRIES AFFECT YOUR CREDIT 4.RAISING YOUR CREDIT SCORE 1. . 3. ALWAYS PAY YOUR BILLS ON TIME 2. YOU SHOULD MONITOR YOUR CREDIT SCORE ANNUALLY.

Why? . etc.EFFECTING YOUR FUTURE Getting a car or home… It is more difficult today to get credit (and that’s with good credit…imagine having bad credit…)…this is affecting Parent/Student Loans. If you choose to get married. you will also gain debt of your spouse.

HELPFUL HINTS • • • • • • • Always sign the back of your card… Don’t leave receipts behind (ATM. Set goals for saving • • .) Don’t ever give credit card number over the phone unless you’ve initiated the call (and not over cordless or cell phones) Ignore credit cards that require you to pay money up front Get your card back after each purchase Check your monthly statement If you get into financial troubles. figuring in fixed costs such as rent or car payments and add in variable a expenses. calculate your bottom line by adding all expenses and subtracting total expenses from your effective monthly income. Then. such as groceries. determine how much you spend each month. Create a budget based on your monthly income. determine if you are spending too much. seek help! Don’t just ignore the credit collectors…negotiate…and do it ahead of time…don’t just wait until they get a hold of you. These simple steps will help make credit cards manageable and reduce the risk of debt. etc. Once you have your bottom line.

The more you understand this concept.WORDS OF WISDOM! Credit cards are centered on the idea of taking responsibility for your own actions. this is the time to take control of your own personal finances and begin to build good credit. give you more money. they do not. As college students. in fact. the easier it will be to avoid dept and plan for financial success. Start by being responsible with your credit card usage. Although credit cards give a feeling of power. They only change the way you pay. .