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Financial Planning: Credit Cards

Financial Planning: Credit Cards. PART 1: DEBT. Debt balances are current as of June 2018. American Debt. Average American Income. https://www.statista.com/statistics/233301/median-household-income-in-the-united-states-by-education/.

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Financial Planning: Credit Cards

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  1. Financial Planning: Credit Cards

  2. PART 1: DEBT

  3. Debt balances are current as ofJune 2018 American Debt

  4. Average American Income https://www.statista.com/statistics/233301/median-household-income-in-the-united-states-by-education/ http://www.buzzle.com/articles/average-american-income.html

  5. The average age at which a U.S. consumer gets their first credit card is 21 • 84% of college students have credit cards • The average undergraduate student has $2,200 in credit card debt • The average college graduate has $4,100 in credit card debt • The average college graduate has nearly $20,000 in debt College Students & Credit

  6. Pretend you owe $9,000 to your credit card company • If the interest on your credit card is 18% • The minimum payment is $135 per month. • How long would it take to pay off the $9,000 debt and finance charges? How Long Would It Take?

  7. Trick question! You will NEVER pay off the $9,000 debt paying the minimum payment of $135 per month. • Do the math: $9,000 x .18 = $1,620 finance charge. • $1,620 divided by 12 = $135 per month How Long Would It Take?

  8. The average interest rate is about 14.98% A.P.R. (Annual Percentage Rate) • As of 2008, the average number of credit cards Americans have is 3.5 • The average credit card debt per borrower in the U.S. is $4,996 in 2012 Statistics

  9. Let’s say you owe $3,000 on a credit card with a 15% interest rate • If you make the minimum payment of $75, it would take Over 4 ½ years to pay off your credit card! The Cost of Time

  10. Credit Card Debt Illustration http://www.youtube.com/watch?v=Vz05A6cP6Iw Running Time 3:24

  11. Part 2: FICO Score

  12. 84% of undergraduates indicated they needed more education on financial management topics. In fact, 64%would have liked to receive information in high school (Source: Sallie Mae, "How Undergraduate Students Use Credit Cards," April 2009) Financial Management Training

  13. The FICO score is one such popular scoring method. Its scale runs from 300 to 850. • The vast majority of people will have scores between 600 and 800. • A score of 720 or higher will get you the most favorable interest rates on a mortgage Credit Scores

  14. Breakdown of Credit Scores

  15. What Makes Up Your Credit Score?

  16. Part 3: How to avoid the Credit Card=DEVIL

  17. Fees are how credit card companies make money off of you. Some of the most common fees include: • Application fee • Annual fee • Cash advance fee • Going over your credit limit • Late fee • Finance charge (interest) • Returned check fee What are Fees?

  18. Sample Credit Card Offer

  19. Look for errors. Write your credit card company immediately. • Has your rate been increased? • Check your balance. Know what you owe Read Your Statement Carefully

  20. Pay on time. Late payments negatively affect your credit score. There may be fees for late payments. • Avoid cards with annual fees. Credit Card Tips

  21. Usually occur before or after holidays • Interest is still being added to your balance Say No to Skip Payments

  22. Increasing your credit line is like having a whole cake in front of you to eat instead of a small piece. Reject Offers to Increase Your Credit Line Small Credit Line Large Credit Line

  23. Ask yourself, “Do I really need this?” • Make more than the minimum payment • Avoid reaching the credit card limit. Keep a portion of your credit limit for emergencies • Late fees may also put you over your credit limit and raise your rates Credit Card Tips

  24. Paying off your balance is difficult if you keep adding to it. • Use your debit card or cash instead Stop Using Credit

  25. If you have a long history with the credit card company and have made payments on time, call and ask for a rate reduction Reduce the Interest Rate

  26. Transfer your balance to a credit card with a lower interest rate*. • *be careful about introductory rates Transfer Your Balance

  27. Never borrow more than 20% of your annual net income (after taxes) • For example, if your annual net income is $9,600, you should not have a debt load more than $1,920 • Your monthly debt payments should never be more than 10% of your monthly net income. Credit Cards Rules of Thumb

  28. Don’t let anyone use your card • Instead of signing the back of the card, write “Check I.D.” • Check your credit scores at least once a year to check for errors. It is free (once a year) Credit Cards Safety Tips

  29. Establishes credit history • - Helpful in the future when you go • to buy a house or a car • Some credit cards give you cash back • You can borrow money for free if it is paid back in full in 30 days! Credit Cards Can Be Good

  30. www.annualcreditreport.com • www.experian.com • www.transunion.com • www.equifax.com Request Copies of Your Credit Report

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