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Staying on Good Terms: Managing Credit and Debt

Staying on Good Terms: Managing Credit and Debt. The Upside of Credit Use. Buy/consume now, pay later Establish favorable credit history Protect against fraud Cope with emergencies. The Downside of Credit Use. The price of credit is high – KNOW the APR! Additional fees add to the cost

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Staying on Good Terms: Managing Credit and Debt

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  1. Staying on Good Terms:Managing Creditand Debt

  2. The Upside of Credit Use • Buy/consume now, pay later • Establish favorable credit history • Protect against fraud • Cope with emergencies

  3. 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

  4. 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

  5. All Cards Are NOT Created Equal • Credit • Credit Cards • Charge Card • Debit • ATM Card • Check Card

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

  7. 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-card-reform.html

  8. 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 can’t 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

  9. Credit Card Reform, Continued • Among other provisions, those younger than 21 won’t 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

  10. 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

  11. Credit Myths • Once paid, bad debt will go away • I’m not responsible for debts on joint accounts or co-signed accounts if they aren’t my purchases • Credit is what got me into this mess • Credit card companies wouldn’t send me offers if I couldn’t afford it • If I don’t use credit, I won’t be able to buy anything

  12. Ten Credit Mistakes • Overspending • Holding too many credit cards • Making only minimum payments • Carrying a permanent balance • Assuming low interest rates stay the same Continue...

  13. Ten Credit Mistakes • Paying a higher interest rate than necessary • Paying extra for “incentive” credit cards • Not reading the disclosure statement • Paying off the wrong credit cards first • Ignoring extra fees or penalties

  14. Beware of Higher Cost Credit • Tax Refund Loans • Rent-to-Own • Car Title Loans • Bounced Check Protection

  15. 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

  16. Staying Out of CreditCard Trouble • Shop for the credit card with the best terms. Consider: - Annual Fee - APR - Rewards Program • Don’t charge perishable items • Pay off as much as possible every month

  17. Pay As Much As You Can!Balance: $3,000 Interest Rate: 18%

  18. Timing Makes a Difference • Don’t buy on impulse • Notify your creditors if you can’t make your payments on time • Report lost/stolen cards immediately

  19. 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

  20. 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

  21. For individual help with serious debt problems, contact: CredAbility www.CredAbility.org 800-251-CCCS

  22. For more information, contact: The Peer Financial Counseling Program (insert web address, phone number, and/or e-mail) 23

  23. Special Thanks to...

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