C.A.R.E.

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# C.A.R.E. - PowerPoint PPT Presentation

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.

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1. C.A.R.E. Credit Abuse Resistance Education A program of: WV State Bar Association WV Bankruptcy Courts WV Bankruptcy Law Committee

2. 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%

3. How Much Would it Be? Your total cost would be \$2,052 and it would take you 7 months to pay for it!

4. 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

5. 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

6. Your Choices • Pay \$2,000 cash • Pay \$2,052 over seven months • Pay \$4,062 over seven years

7. 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…

8. …MILLIONS You would have a nice fat bank account totaling \$1,200,000!

9. What is Credit? • Credit is the ability to borrow money • Borrowing is the creation of debt • Debt is what you owe

10. Reasons for Having a Credit Card • Emergencies • Large purchases (necessities) • Establish a credit history • Identification • Safety

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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