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C.A.R.E. Credit Abuse Resistance Education A program of: WV State Bar Association WV Bankruptcy Courts WV Bankruptcy Law Committee. What if You Bought…. A plasma TV for $1,200 A computer for $500 A new car stereo for $300 Totaling: $2,000

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Credit Abuse Resistance Education

A program of:

WV State Bar Association

WV Bankruptcy Courts

WV Bankruptcy Law Committee

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What if You Bought…

A plasma TV for $1,200

A computer for $500

A new car stereo for $300

Totaling: $2,000

  • You use your credit card to buy the system making monthly payments of $300

  • Assume you never miss a payment and the annual percentage rate is 8%

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How Much Would it Be?

Your total cost would be $2,052 and it would take you 7 months to pay for it!

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What If…

18% APR

  • Your credit rating is poor and you must pay an interest rate of 24%

  • You also only pay the MINIMUM MONTHLY PAYMENT of only $50 per month

23% APR

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Now, How Much Would it Be?

  • It would take you 82 months (almost 7 years) to payoff the system

  • Your total payments would be $4,062

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Your Choices

  • Pay $2,000 cash

  • Pay $2,052 over seven months

  • Pay $4,062 over seven years

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How Much Could I Save?

If you took the $2,000 you save as a result of paying cash for the stereo and invest it together with $2,000 every year until you are age 60…

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You would have a nice fat bank account totaling $1,200,000!

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What is Credit?

  • Credit is the ability to borrow money

  • Borrowing is the creation of debt

  • Debt is what you owe

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Reasons for Having a Credit Card

  • Emergencies

  • Large purchases (necessities)

  • Establish a credit history

  • Identification

  • Safety

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Types of Cards

  • Debit Cards

    • When used, money is drawn directly from your bank account, just like writing a check

    • If there is no money in the account, the card cannot be used

    • Debit cards do not extend credit

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Types of Cards

  • Charge Cards

    • Issued by retail stores to be used exclusively at that particular store (such as Macy’s, Best Buy or Sears)

    • If a balance is carried from month to month, the interest rate is usually in excess of that offered by other card issuers

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Types of Cards

  • Credit Cards

    • Involves the extension of credit by the card issuer

    • Credit cards are accepted at almost any store

    • If a balance is carried from month to month, interest rates are set forth in the cardholder agreement

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What is Interest?

  • 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 company to company

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Gross wages $2,000

Payroll deductions (400)

Net monthly pay $1,600

What is a Budget?


Rent $ 500

Utilities 100

Food 200

Clothing 20

Laundry 20

Transportation 200

Recreation 30

Insurance 90

Installment Payments 350

Misc. Expenses 50

Total Expenses $1,600

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What is so importantabout Good Credit?

  • Your history of payments, employment, and salary makes you a good candidate for a loan

  • You can get a better interest rate – lower payments

  • You will be viewed as financially trustworthy – better loan terms

  • May help you rent an apartment and obtain employment – most landlords and prospective employers will look at your credit report

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What is so importantabout Bad Credit?

  • Your history of late payments, not paying your debts or borrowing too much money makes you a poor candidate for a loan

  • You will pay two or three times more than the original price

  • You may have trouble getting a loan, a credit card, a place to live, a student loan or employment

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Consequences of Credit Abuse

  • Divorce or relationship problems

  • Depression or suicide

  • Bad credit rating

  • Reduced performance at school or work

  • Being turned down for a loan for a house, car or job

  • Having to drop out of school

  • Not having money to retire or help your children

  • Creditors calling your home or work

  • Being sued and having judgments against you – wages garnished

  • Bankruptcy

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Simple Rules to Remember

  • Have a budget and live within it

  • Don’t have more than one credit card

  • Shop around and get the best deal

  • If you can eat it, drink it, or it costs less than $10, don’t charge it

  • Use a debit card, check or cash whenever possible

  • Pay off the balance every month

  • Never make just a minimum payment

  • Understand the difference between needs and wants

  • If you are borrowing to pay a credit card debt – STOP – you are in trouble