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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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c a r e

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
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%
how much would it be
How Much Would it Be?

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

what if
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

now how much would it be
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
your choices
Your Choices
  • Pay $2,000 cash
  • Pay $2,052 over seven months
  • Pay $4,062 over seven years
how much could i save
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…

millions
…MILLIONS

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

what is credit
What is Credit?
  • Credit is the ability to borrow money
  • Borrowing is the creation of debt
  • Debt is what you owe
reasons for having a credit card
Reasons for Having a Credit Card
  • Emergencies
  • Large purchases (necessities)
  • Establish a credit history
  • Identification
  • Safety
types of cards
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
types of cards12
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
types of cards13
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
what is interest
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
what is a budget
INCOME

Gross wages $2,000

Payroll deductions (400)

Net monthly pay $1,600

What is a Budget?

EXPENSES

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

what is so important about good credit
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
what is so important about bad credit
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
consequences of credit abuse
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
simple rules to remember
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
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